Program
Multi-family DSCR for Indiana two-to-twenty unit buildings
Duplexes, fourplexes and small apartment buildings are underwritten on the rent roll, not on the borrower’s tax returns. The building either covers its own costs or it does not.
Why multi-family reads differently
A two-to-four unit property is appraised with an income approach. The appraiser reports a rent for each unit, states the operating assumptions behind the building, and values the property partly on what it produces. That makes the report more legible than a single-family appraisal: the rent roll, the vacancy assumption and the expense load are all visible, and the loan sizes against them.
Larger buildings behave the same way with more moving parts. Once a property has five or more units, the conversation shifts to commercial underwriting: trailing income and expenses, a rent roll with lease terms, and a lender whose appetite matches the asset rather than a residential program.
What we look at before anyone orders an appraisal
- Rent roll with lease terms. Unit, bed and bath count, current rent, lease start and end, deposit held, and whether the rent is at market.
- Operating expenses. Taxes, insurance, utilities the owner pays, management, maintenance, and any contract services. A building with owner-paid utilities underwrites differently from one with separate meters.
- Condition and deferred maintenance. Roof, mechanicals, siding, parking and common areas. A building with a fifteen-year-old roof is a building with a capital plan.
- Occupancy and lease-up. Stabilized occupancy is easier to place than a building mid-lease-up, and a value-add business plan needs bridge capital rather than a long-term note.
- Entity and guarantor. Which LLC takes title, who guarantees, and what the operating agreement authorizes.
Two-to-four units versus five-plus
Two-to-four unit houses are financed on residential-style forms with an income approach, and they are the sweet spot for many Indiana investors: they rent like houses, they finance like small apartments, and they trade in a deep pool of buyers when it is time to sell.
Five-plus unit buildings move into commercial territory. Expect a lender to want a trailing twelve-month operating statement, a rent roll with lease expirations, a property condition review and sometimes an environmental screen. Terms are shorter and prepayment terms matter more, so the exit plan belongs in the conversation from the first call.
Mixed-use and the residential majority
Indiana main streets are full of two-story buildings with a storefront below and apartments above. Many lenders will finance them when the residential income is the majority of the property’s use and the commercial tenant is on a lease that does not dominate the rent roll. A building that is mostly commercial is a different loan, and we will tell you which side of the line it sits on.
The numbers we need to quote a scenario
Send the address, the unit mix, the current rents, the tax bill, an insurance quote or the current premium, and the purchase price or estimated value. With those five items we can usually tell you within a day whether the property clears the coverage test at a workable loan amount, and which lenders are the realistic candidates.
Where multi-family underwriting goes wrong
The recurring mistake is underwriting gross rent and forgetting the owner-paid side of the ledger. Water, sewer, trash, common-area electricity, snow removal and landscaping are real line items in Indiana, and a building whose rent looks strong can be thin once those costs are counted. The second mistake is assuming an inherited rent roll is a market rent roll: below-market leases in a building you just bought are a future opportunity and a present coverage problem.
A fourplex in Fort Wayne is not a fourplex in Bloomington.
Local rent, local taxes and local insurance change the coverage math. Send the address and we will build the ratio from the inputs that apply to that parcel.