Texas · 5 to 10 units · Investment buildings only

Texas DSCR Financing for 5-10 Unit Apartment Buildings

TL;DR: You can finance a 5- to 10-unit Texas apartment building through small-balance DSCR or investor multifamily programs that qualify the building on its rents, not your personal income. Five units moves you out of residential underwriting. Expect a rent roll, leases, an operating statement and an income-based appraisal. Texas cities generally can't impose rent control, but property taxes and insurance take a big share of the rent. We're a broker and compare wholesale programs.

Sized on the rent roll and a normalized T-12, not your tax returns
We stress-test Texas taxes and insurance before we shop programs
Every unit must be tenant-occupied; business purpose only

Check a 5-10 unit Texas deal

Two minutes. We reply with which wholesale programs fit the building.

Duplex to fourplex?

Financing a duplex, triplex or fourplex instead? That's covered on our Texas home site. For all Texas DSCR options, see dscrloanstexas.com.

Is there a DSCR loan for a 6-unit or 8-unit building in Texas?

Yes. Some wholesale lenders offer DSCR-style or small-balance multifamily programs for five to roughly ten residential units, and each lender sets its own unit-count and loan-size limits. The building must be entirely tenant-occupied investment property. Approval depends on the rent roll, operating expenses, property condition, your credit and reserves. Start with the 5-10 unit DSCR loan overview.

Do Texas rent rules limit how lenders project my rents?

Texas Local Government Code § 214.902 generally bars cities from adopting rent control. The only exception is a housing emergency caused by a disaster, and the ordinance needs the governor's approval. Lenders still underwrite on current leases and supportable market rent, but they usually don't have to account for local rent caps.

What does a lender want from a Texas small apartment seller?

Ask the seller for a certified rent roll, copies of all leases, a trailing 12-month income and expense statement, recent utility bills, the current tax bill, the insurance loss history and any service contracts. Lenders and appraisers use these to check rents, occupancy and real operating costs. Our guide on how to read a Texas rent roll shows what to look for.

Why this size is different

Built for the building between a fourplex and a complex

Rent roll first
Five units moves you into small-balance underwriting. We read the rent roll and leases the way an underwriter will, before you spend money on an appraisal.
Texas expenses, honestly
Property taxes reset after a sale and insurance moves fast. We re-run coverage with the next tax bill and a real premium, not the seller's numbers.
Programs that take your unit count
Fewer wholesale lenders work at five to ten units, and their limits differ. We shop the ones that fit your building, location and condition.
Broker, not lender
We arrange and shop financing from wholesale lenders. The lender underwrites, approves and funds; we keep the file moving.

Programs

Small multifamily financing paths

How do 2-4 unit, 5-10 unit and bank commercial loans compare in Texas?

Texas investors moving up from fourplexes often compare these three. Here are the factual differences, with no pricing:

Question	2-4 unit DSCR	5-10 unit DSCR / small-balance multifamily	Bank commercial multifamily
Underwriting lane	Residential investor	Investor multifamily or small-balance commercial	Commercial real estate
Key income document	Leases plus the appraiser's rent schedule	Rent roll, leases and trailing operating statement	Rent roll, operating history and sponsor financials
Personal tax returns	Usually not used to qualify	Usually not used to qualify	Commonly requested, along with global cash flow
Appraisal focus	Comparable sales plus market rent	Income approach plus small apartment sales	Income approach; deeper reports possible
Program availability	Widely available	Fewer lenders; minimum and maximum unit counts vary	Depends on the bank's appetite and your relationship
Typical structure	Longer fixed-period options are common	Varies by program; ask about term and prepayment	Often shorter terms or balloons; covenants possible
Where Loan Daddy fits	Yes (see dscrloanstexas.com)	Yes, through wholesale programs	We don't arrange bank relationship loans

If you have strong tax returns and a local bank that wants the deposits, get a bank quote too. If your returns show heavy write-offs or you're growing quickly, a rent-based 5-10 unit program is often easier. The full breakdowns are in 2-4 unit vs 5-10 unit DSCR and 5-10 unit DSCR vs a bank commercial loan.

Comparing short-term money instead? See DSCR vs hard money for 5-10 unit buildings.

What changes the DSCR on a Texas 5-10 unit building?

Property taxes

Texas has no state income tax, and local governments rely heavily on property taxes. On a small apartment building, the tax bill is often one of the largest expenses. Rentals get no residence homestead exemption, and county appraisal districts set values every year (owners can protest). Budget on what the next bill is likely to be, especially after a sale. See Texas property taxes on a 5-10 unit building.

Insurance

North Texas hail, Gulf Coast windstorm and flood zones all affect premiums. Coastal buildings may need a separate windstorm policy. Older frame buildings and roofs near the end of their life can be harder to insure. Get quotes on the actual building before you sign a purchase contract with a short option period.

Utilities

Many older Texas small apartment buildings are master-metered for water or electricity. If the owner pays utilities, they're a real expense. Some owners bill tenants back through submeters or allocation. Texas regulates submetering and allocation for apartments, so follow the rules and the lease terms. More in master-metered utilities and DSCR.

Repairs and deferred maintenance

Lenders and appraisers look at roofs, foundations (a common issue with Texas clay soils), HVAC and parking surfaces. A building with major deferred maintenance may need a bridge loan first.

Vacancy and concessions

A building with several vacant units, or recent move-in concessions, may not show stabilized income yet. Lenders generally want actual collected rent near market before they'll size a long-term loan.

How do lenders read a Texas 5-10 unit operating statement?

Underwriters rarely take a seller's profit-and-loss statement as given. Expect them to normalize it:

Vacancy and credit loss. Even a fully leased building usually gets a vacancy allowance.
Management. If the seller self-manages, the lender often adds a management expense anyway, since you may not run it the same way.
Replacement reserves. Many programs add an allowance for roofs, appliances and other components that wear out.
Taxes and insurance at today's cost. Last year's bill is replaced with the current or projected one.
One-time items removed. Unusual repairs or one-time income are taken out so the statement reflects a typical year.

Run your own numbers the same way before you make an offer. A deal that only works on the seller's P&L usually won't hold up in underwriting. The step-by-step version is in normalizing a T-12 for a small apartment loan.

Try it on your building: the 5-10 unit DSCR calculator shows gross-rent and NOI coverage side by side.

Texas metros

Small apartment financing, metro by metro

Statewide rules apply everywhere, but flood and wind exposure, the age of the stock and the depth of comparable sales change by city. Start with the Texas small apartment overview, or jump to a metro:

Which Texas landlord rules matter on a small apartment purchase?

Texas residential landlord-tenant law is mostly in Chapter 92 of the Texas Property Code, which applies regardless of unit count. When you are buying a 5-10 unit building, look at:

Security devices. Subchapter D requires specific security devices, such as keyed deadbolts, door viewers and window latches, on residential rental units, with rules for rekeying between tenants. Older buildings sometimes fall short, and fixing that is a closing-budget item.
Smoke alarms. Subchapter F requires smoke alarms in rental units and sets inspection and repair duties.
Repair duties. Subchapter B sets landlord duties to repair conditions that materially affect health or safety. Unresolved repair requests can become disputes after you buy.
Security deposits. Subchapter C covers deposit handling and refunds. Make sure the deposits transfer correctly at closing.

Lenders don't enforce these rules, but they affect your costs, your liability and how stable the rent roll really is. Use the Chapter 92 buyer's checklist. Not legal advice; talk to a Texas real estate attorney.

When should a Texas 5-10 unit deal start with bridge financing?

Start with short-term financing if the building has high vacancy, needs major repairs like a roof, foundation or system replacement, or has non-paying tenants you will need to work through. Long-term DSCR and small-balance programs want a stabilized property. A common Texas sequence is to buy with bridge financing, renovate, lease up, then refinance into long-term financing through a 5-10 unit cash-out refinance or rate/term refinance. Compare the two paths in DSCR vs hard money.

How should I hold title to a Texas apartment building?

Many investors buy 5-10 unit buildings in an LLC, and many wholesale programs lend to LLCs, usually with personal guaranties from the members. Bring the certificate of formation, company agreement, EIN letter and any assumed-name filings. If several partners are involved, lenders typically require guaranties from members above a certain ownership share. Each program sets its own threshold.

What should I send for a Texas 5-10 unit scenario?

Address, county, unit count and unit mix
Rent roll with lease dates, current rents and deposits
Trailing 12-month income and expense statement
Current property tax bill and appraisal district value
Insurance quote(s), including windstorm or flood if applicable
Utility setup (master-metered or individually metered) and any billing-back arrangements
Purchase price or value, loan request and planned capital work
Entity documents if you're borrowing in an LLC

How it works

How do I start?

Send the scenarioUse the form on this page or the full version at /apply. A rent roll and T-12 speed things up.
We stress-test the numbersWe re-run the operating statement with realistic Texas taxes, insurance, vacancy and reserves before we look at programs.
We compare wholesale programsWe shop the programs that accept your unit count, location and condition, and explain the trade-offs.
You choose; the lender underwritesThe wholesale lender underwrites, approves and funds. We keep appraisal, insurance and title moving.

Start a Texas 5-10 unit scenario Investment property only. Every unit must be tenant-occupied.

FAQ

Texas small apartment DSCR FAQ

Can I live in one unit of a Texas 7-plex and use this financing?

No. These programs are only for business-purpose, non-owner-occupied property, so every unit has to be rented to tenants. If you or a family member will live in the building, you'd need a different product, and we don't arrange owner-occupied loans.

Can a Texas city cap the rent on my apartment building?

Generally, no. Texas Local Government Code § 214.902 lets a city adopt rent control only after finding a housing emergency caused by a disaster, and the governor has to approve the ordinance. Your rent increases still have to follow your leases and Texas Property Code rules.

Will the lender use the seller's rent roll or the appraiser's numbers?

Both. The lender reviews the seller's rent roll and leases, and the appraiser checks market rents and expenses with an income approach. If the two don't match, underwriters usually use the more conservative figure. Clean, matching documents make a big difference.

Do Texas property taxes go up after I buy an apartment building?

They can. Appraisal districts reappraise property regularly, and a recent sale price can show up in the next valuation. Rentals have no residence homestead exemption or cap. Budget for the likely new bill, and look at protesting if the value seems high.

Are older Texas buildings with foundation issues financeable?

Sometimes. Lenders and appraisers look at whether foundation movement is active, how it affects habitability and value, and whether repairs are documented. A structural engineer's report and repair records help. Significant active problems often call for bridge financing first.

Do you arrange loans on mixed-use Texas buildings with retail space?

Some programs accept limited commercial space in a mostly residential building, and others don't. Send the square footage, the commercial lease and how much of the income comes from the retail portion, and we'll tell you which programs might consider it.

More answers on the 5-10 unit DSCR FAQ and in the small apartment financing guides.

Licensing

Who is Loan Daddy LLC?

DSCR Loans Texas 5-10 Units is a Loan Daddy LLC brand. Loan Daddy LLC is a mortgage broker, not a lender (NMLS #2827624). Licenses: AZ CMB Licensed · #CMB-2016143; We arrange business-purpose loans on non-owner-occupied investment property in Texas through wholesale lender partners, who underwrite and fund under their own guidelines and licenses. We don't arrange owner-occupied or consumer-purpose loans. Details on licensing and about us.

Sources

Nothing on this page is legal or tax advice.

Program Structure Comparison & Investor Brief

Quick Answer · Reviewed by Loan Daddy LLC editorial team

A DSCR (Debt Service Coverage Ratio) loan on dscrloanstexas.net is a business-purpose mortgage for non-owner-occupied rental real estate where qualification is driven by property cash flow (Gross Monthly Rent ÷ PITIA) rather than personal W-2 or tax-return income. Loan Daddy LLC (NMLS #2827624) is a mortgage broker that compares wholesale DSCR programs across multiple lenders.