Side by side
| Question | 5-10 unit DSCR / small-balance | Bank commercial multifamily |
|---|---|---|
| Primary qualifier | The building's rent and operating income | The building plus your personal and business financials |
| Personal tax returns | Usually not used to qualify | Commonly requested |
| Global cash flow | Usually not required | Common |
| Deposit relationship | Not required | Often expected |
| Structure | Varies; ask about fixed periods and prepayment | Often shorter terms or balloons |
| Covenants | Typically few | Coverage or liquidity covenants are possible |
| Decision maker | Wholesale lender underwriting | The bank's credit committee |
| Through us? | Yes, via wholesale lenders | No; we don't arrange bank relationship loans |
When a bank loan is a good fit
Local and regional banks in Texas do lend on small apartment buildings, especially for borrowers they already know. If you have strong, simple tax returns, meaningful deposits and a bank that likes the neighborhood, a bank loan can be competitive. Ask about term length, balloons, recourse, prepayment and covenants, since those are where bank loans differ most.
When a rent-based program fits better
- Your returns show heavy depreciation or business write-offs that reduce taxable income
- You are self-employed or your income varies year to year
- You are adding buildings quickly and do not want every purchase tied to one bank relationship
- You want a structure sized on the building rather than on covenants tied to your personal finances
Balloons are the hidden issue
Many Texas small apartment buildings already carry a bank or seller-financed loan with a short term. When the balloon comes due, the owner has to refinance, often on whatever terms are available that year. If that is you, read about the 5-10 unit rate/term refinance and start several months before maturity.
How to compare quotes
Put both quotes side by side on the same items: loan amount, amortization, term, prepayment, recourse, reserves required, covenants and closing costs. Pricing matters, but on a building you might hold for years, structure often matters more. We will walk through ours with you; for the bank quote, ask the same questions.
Comparisons are general and qualitative. Program terms vary by lender and change over time. Not a commitment to lend.