Small multi-unit buildings are a natural first US investment for many foreign investors: several rents under one roof, one roof to insure, and an exit to either an investor or, in many markets, an owner-occupier. Passy Capital finances 2-4 unit properties, and small multifamily up to 9 units, held for investment by a US LLC.
One condition matters more here than anywhere else: nobody in your family lives in any of the units. A 2-4 unit building with an owner living in one unit is a consumer loan, and outside business-purpose lending.
Which loan fits which plan
How a DSCR loan reads a multi-unit building
A DSCR loan compares the building's rent with the debt service, taxes, insurance and association dues. With several units, the lender adds the leases, or market rents for vacant units, and checks the total covers the payment. You do not need US income or a US credit score; the rent does the work. See minimum DSCR for a rental for how the ratio is calculated.
Expect the appraiser to look at both comparable sales and the building's income. Vacant units, deferred maintenance and rents well below market are the usual reasons a 2-4 unit appraisal disappoints.
The $1M floor
Passy Capital's loans start at $1M. In many US markets a single fourplex trades below the price that produces a $1M loan, so investors often reach the floor with a larger building, a renovation where the works budget is part of the loan, a new build, or a portfolio of several small buildings. Up to 9 units in one building stays in the core box; 10 units and above are placed through our capital-partner network.
Checklist
Then send the deal: term sheet in 24 to 48 hours, closing in about two weeks on a clean file. The DSCR page covers the rental loan in detail.
- US LLC formed, EIN issued, bank account funded; see setting up a US LLC
- Current leases and a rent roll, or market rents for the units
- Building condition: roof, systems and any code issues, since they drive both the appraisal and the budget
- Local rules on rental registration, inspections or rent levels in the city you are buying in
- Insurance quote for a non-owner-occupied 2-4 unit property
Buying a 2-4 unit building that needs work
Many of the best small multi-unit buys are tired buildings with rents below market. A renovation or fix and flip loan finances the purchase and the works together, up to 90% of total cost, and releases the works budget in draws as each stage is completed. Once the units are renovated and let at market rents, a DSCR loan refinances the building on the new rent roll. Plan both loans at the start: the rents you can prove after the works decide how much of the first loan the second one repays.
If tenants are in place, check local rules on notice, relocation and rent increases before you budget the works, since they set the pace at which units can be renovated.