What Is a Small Balance Multifamily Loan?
Small balance multifamily loans finance apartment buildings with 5-20 units and loan amounts typically from $500K to $5M. Once you cross the 5-unit threshold, you leave residential lending and enter commercial multifamily territory. Underwriting shifts from personal income to property-level net operating income (NOI) and debt service coverage.
This is a growing niche because small apartment buildings are the backbone of rental housing in most cities, yet they fall between residential (too many units) and institutional multifamily (too few units) lending programs.
The sweet spot: 5-20 unit buildings often generate strong cash flow with lower competition than single-family rentals. Many investors scale from SFR to small multifamily as the next step in portfolio growth.
Who Small Multifamily Loans Are For
- Investors buying 5-20 unit apartment buildings
- SFR investors scaling up to their first commercial multifamily deal
- Value-add investors renovating and repositioning small apartments
- Portfolio holders refinancing or consolidating small multifamily assets
Key Features
Permanent loans: 20-30 year terms, 65-80% LTV, based on NOI/DSCR. Bridge loans: 12-36 months for acquisition and repositioning. Agency (Fannie Small Loan): competitive rates for stabilized 5+ unit properties. Down payments from 20-35%. Rates depend on stabilization, location, and borrower experience.