DSCR Loans for Multi-Family Properties 2026: 2–4 Unit Investor Guide

Yes. DSCR loans are available for all 2-4 unit residential property types including duplexes, triplexes, and fourplexes. These properties qualify as residential (not commercial) and access the same DSCR non-QM loan programs as single-family rentals. Multi-family properties use the combined rental income from all units for the DSCR calculation, which frequently produces stronger ratios than single-family rentals at comparable price points.

Multi-family properties produce higher DSCR ratios because multiple units generate aggregate rental income that outpaces the proportional increase in mortgage payment. A fourplex producing four rent checks against one mortgage payment creates more favorable math than a single-family property producing one rent check against one mortgage. The per-unit mortgage cost is lower in multi-family because land, roof, and foundation costs are shared across units.

Minimum down payments for multi-family DSCR loans are 20-25% for duplexes and 25-30% for triplexes and fourplexes, depending on lender, DSCR ratio, and credit score. Properties with DSCR ratios above 1.25 and borrower credit scores above 740 access the lowest down payment requirements. Some lenders offer 20% down on duplexes with strong DSCR ratios through wholesale channels.

Yes. DSCR loans allow vesting in LLCs, corporations, and other business entities. This is a significant advantage over conventional financing, which requires personal name vesting. Entity vesting provides liability protection, separates investment assets from personal assets, and simplifies tax reporting for multi-property investors. Most DSCR lenders accept LLC vesting with no rate adjustment.

Add the monthly rent from all three units to get total gross monthly income, then divide by the total monthly PITIA. For example: Unit 1 rents for $1,800, Unit 2 for $2,000, Unit 3 for $1,900. Total monthly income is $5,700. If PITIA is $4,400, the DSCR is $5,700 divided by $4,400, which equals 1.30. Each unit's individual rent does not need to meet any standalone threshold.

If one unit in a fourplex goes vacant after closing, the DSCR ratio drops by approximately 25% of the rental income component. A fourplex with a 1.28 DSCR at full occupancy would drop to roughly 0.96 DSCR with one vacant unit. This does not trigger a loan default because DSCR is calculated at origination, not monitored monthly. However, this illustrates why maintaining reserves and minimizing vacancy through competitive rents and responsive management is essential for multi-family DSCR investors.

Both states offer strong multi-family DSCR opportunities in different market segments. Washington offers lower entry points and stronger DSCR ratios in markets like Tacoma, Spokane, and Everett. California offers larger total appreciation potential, premium rental markets, and more inventory in the 2-4 unit category. Many investors in both states use DSCR financing to build portfolios across price tiers. Mo Abdel is licensed in both states, providing wholesale DSCR access across all California and Washington markets.

DSCR loans are available for properties that are already permitted and legally classified as multi-family by the local jurisdiction. Converting a single-family home to a duplex requires permits, inspections, and a certificate of occupancy reflecting the new unit count. Once the conversion is legally complete and the property appraises as a duplex with two separate rental incomes, it qualifies for a multi-family DSCR loan. The conversion itself is typically financed with renovation or construction loans, then refinanced into DSCR once the project is complete and tenanted.

A duplex is typically better for a first-time DSCR investor because it requires a lower total capital outlay, has simpler property management demands, and still provides the multi-unit income diversification advantage over single-family rentals. In California and Washington markets, duplexes also have a larger buyer pool at resale. Fourplexes generate stronger total cash flow but require more capital, more management bandwidth, and carry higher insurance costs. Starting with a duplex allows investors to build a DSCR track record before scaling to larger multi-family properties.

Compare returns by calculating DSCR ratio, cash-on-cash return, and total annual cash flow for each property type at equivalent purchase prices. A $750,000 single-family rental generating $3,400/month rent with a $3,100 PITIA produces a 1.10 DSCR and roughly $3,600 annual cash flow. A $750,000 duplex generating $5,200/month combined rent with a $4,300 PITIA produces a 1.21 DSCR and roughly $10,800 annual cash flow. Multi-family properties consistently produce stronger returns at the same price point because the combined rent from multiple units exceeds the proportional increase in mortgage payment.

Yes. Scaling from single-family to multi-family DSCR financing is a proven portfolio building strategy. Investors use cash-out refinances on appreciated single-family DSCR properties (typically 70-75% LTV) to extract equity for down payments on duplexes, triplexes, or fourplexes. Because DSCR loans qualify each property independently based on rental income, owning existing DSCR-financed properties does not reduce qualification capacity for new multi-family acquisitions. This contrasts with conventional financing where each property reduces remaining DTI capacity.

For multi-family DSCR deal analysis, assume 5-8% vacancy for properties in strong rental markets with low vacancy (coastal California, Seattle metro) and 8-12% for markets with higher turnover. However, DSCR lenders calculate the ratio using gross rents from current leases or appraised market rents without a vacancy deduction in most programs. The vacancy assumption matters for your personal cash flow projection, not the DSCR qualification. Multi-family properties have an inherent vacancy advantage: losing one tenant in a fourplex reduces income by 25%, while losing the single tenant in an SFR eliminates 100% of income.

Moving from 2-unit to 4-unit remains within the residential DSCR loan framework: same lender programs, same 30-year fixed terms, same residential appraisal process. Down payments increase slightly (typically 25% for duplex, 25-30% for fourplex). Moving from 4-unit to 5-unit crosses into commercial real estate financing, which changes everything: shorter loan terms (5-10 years with balloon), commercial appraisals, higher rates, different reserve requirements, and commercial underwriting. This is why 2-4 unit multi-family represents a unique sweet spot for DSCR investors.

California markets with the strongest multi-family DSCR opportunities combine adequate rental demand with purchase prices that produce viable DSCR ratios. Inland Empire cities (Riverside, San Bernardino, Ontario) offer lower price points with strong rents relative to purchase price, producing DSCR ratios of 1.15-1.35 on duplexes and fourplexes. Sacramento and Central Valley markets offer similar dynamics. Coastal Orange County and Los Angeles properties carry higher price points but also command premium rents, though DSCR ratios tend to be tighter (1.00-1.15) requiring stronger credit profiles.

One fourplex typically outperforms two single-family properties at the same total investment amount. A $1M fourplex requires one down payment (25-30%), one closing cost set, one appraisal, and produces four rent checks from a single loan. Two $500K single-family properties require two separate down payments, two closing cost sets, two appraisals, and two separate DSCR loans. The fourplex consolidates management, reduces per-unit acquisition costs, and generates stronger aggregate DSCR ratios. The two-SFR strategy offers geographic diversification and potentially easier resale, but costs more to acquire and manage.

Multi-family DSCR reserve requirements are 6-12 months of PITIA for the subject property, varying by lender, DSCR ratio, and credit score. A fourplex with $6,500 monthly PITIA requires $39,000-$78,000 in liquid reserves. Some lenders also require 2-6 months of reserves for each additional financed property the borrower owns. Investors with DSCR ratios above 1.25 and credit scores above 740 often qualify for the lower end of reserve ranges. Wholesale broker access identifies lenders with the most favorable reserve policies for multi-family transactions.

Yes. For vacant units, DSCR lenders use appraised market rents from the property appraisal rather than actual lease income. The appraiser determines fair market rent for each unit based on comparable rental data. This means a fourplex with two occupied units and two vacant units still qualifies using the total market rent from all four units. Some lenders apply a 5-10% reduction to appraised rents for vacant units. Properties with all units leased and documented rental income generally receive the most favorable DSCR calculations.

Multi-family DSCR financing in Washington follows the same non-QM framework as California: no income verification, qualification based on property cash flow, available through wholesale lender networks. Washington markets like Tacoma, Everett, and Spokane offer multi-family price points that produce strong DSCR ratios (1.15-1.40) due to lower acquisition costs relative to rents. Seattle metro duplexes and triplexes command premium rents but higher prices, producing tighter DSCR ratios similar to coastal California. Mo Abdel is licensed in both California and Washington, providing access to the same 200+ wholesale DSCR lender network across both states.

Multi-family DSCR properties require a landlord or dwelling fire insurance policy covering the full replacement cost, liability coverage (minimum $1M per occurrence for most lenders), and loss of rents coverage. Flood insurance is required if the property is in a FEMA flood zone. Some lenders require umbrella policies for 3-4 unit properties. Insurance premiums for multi-family are 40-80% higher than comparable single-family rentals due to increased liability exposure and replacement costs. The insurance premium directly impacts PITIA and therefore the DSCR ratio, so shopping insurance competitively improves DSCR qualification.

Maximum loan amounts for 2-4 unit DSCR loans range from $2M to $3M depending on the lender, with some specialized non-QM lenders offering up to $3.5M for fourplex properties in high-cost markets. A fourplex appraised at $4M with 25% down could access a $3M DSCR loan from select wholesale lenders. Loan amounts above $2M typically require higher credit scores (720+), stronger DSCR ratios (1.20+), and larger reserve balances. Wholesale broker access is essential for high-balance multi-family DSCR because the lender pool narrows significantly above $2M.