Apartment Purchase Loans for 5+ Unit Buildings

Short answer

A stabilized apartment building is usually bought with a fixed-rate agency, bank or HUD loan sized at up to 75-80% of the lower of price or value, subject to a minimum DSCR, often 1.25x. A building that needs work is usually bought with a bridge loan and refinanced into permanent debt once rents and occupancy stabilize.

Two ways to finance a purchase

Every apartment purchase loan starts with one question: can the building support permanent debt on the day you close? If the building is occupied, collecting rent and producing an NOI that covers a long-term loan, you finance it with permanent debt from the start. If it is not, because units are down, rents are well below market or the last owner deferred maintenance, you buy it with short-term bridge debt and refinance once the work is done.

The two paths cost different amounts, close on different timelines and put different risks on you. A stabilized purchase locks your financing cost for years but gives you little room to change the business plan. A value-add purchase gives you money for renovation and time to lease up, but you are betting that the refinance at the end will be big enough to pay off the bridge loan.

Question	Stabilized purchase	Value-add purchase
Typical first loan	Agency, bank, HUD 223(f), CMBS or life company	Bridge loan, usually floating rate
What the lender sizes on	In-place NOI, re-underwritten for the new owner	Purchase price plus renovation budget (loan-to-cost) and the as-stabilized value
Rate type	Usually fixed	Usually floating, often with a required rate cap
Renovation money	Little or none in the loan	Often funded in the loan, released as work is completed
Exit risk	Low: the loan is the long-term debt	The takeout refinance has to cover the bridge payoff

Not sure which side a building falls on? The loan matcher asks six questions about occupancy, size, recourse and renovation plans and ranks the programs that fit.

Buying a stabilized building with permanent debt

For a building that is already performing, the main choices are the two agencies, HUD, banks, and for larger loans CMBS and life companies. The agencies publish their limits, so you can test a deal before you call anyone.

Program	Loan size	Max LTV	Min DSCR	Notes
Fannie Mae Small Mortgage Loans	Up to $9 million	80%	1.25x	Existing, stabilized properties with 5+ units
Freddie Mac Conventional Small	$2 million to $10 million	80%	1.25x	50 units or fewer; replaced Freddie's Small Balance Loan program on April 15, 2026
HUD 223(f), market rate	Varies	87%	1.15x	Up to 35-year term; longest timeline of the group
HUD 223(f), affordable	Varies	90%	1.11x	Rent-restricted properties
Bank or credit union	Varies by lender	Varies	Varies	Often recourse; shorter terms; flexible on property condition

These are maximums. The actual loan is the smallest of three numbers: the LTV limit on the lower of price or appraised value, the loan the DSCR test supports at the quoted rate, and any debt yield floor the lender applies. On most purchases today the DSCR test binds before the LTV limit does, which is why the rate you lock matters as much as the price you pay.

HUD 223(f) offers the highest leverage and the longest fixed term, but it is rarely the right fit when a seller expects a normal closing schedule. Agency small-loan programs close faster and are the usual choice for a stabilized 5 to 50 unit purchase. Banks earn their place when the building has a story the agencies will not underwrite: a heavy commercial component, a short operating history, or a plan to sell or refinance within a few years. See Fannie Mae Small Loans, HUD 223(f) and bank loans for program detail.

Buying a value-add building: bridge, then takeout

A bridge loan finances the purchase and, usually, part of the renovation. It is sized on cost (purchase price plus renovation budget) rather than on today's NOI, because today's NOI is the problem you are buying. The lender then holds back the renovation dollars and releases them as completed work is inspected.

The plan only works if the property refinances into permanent debt at the end. That means the stabilized NOI, at the rate available when you refinance, has to support a loan big enough to repay the bridge principal, the exit fee and your closing costs. If it does not, you write a check at the takeout or sell. Run both sides together before you sign a purchase contract:

Value-add purchase and takeout

Purchase and bridge loan

Purchase price ($)Renovation budget ($)Closing costs (% of price)Bridge loan-to-cost (%)Bridge rate (%)Months until refinance

Permanent takeout

Stabilized NOI ($/yr)Takeout rate (%)Takeout min DSCR (x)Takeout max LTV (%)Cap rate for stabilized value (%)

All-in cost–

Bridge loan–

Equity at closing–

Interest carry–

Stabilized value–

Takeout loan–

Cash at the refinance–

Equity left in–

Estimates only, not a loan quote.

The calculator above models the purchase, renovation and bridge loan, then tests the agency takeout on the stabilized numbers. For the takeout alone, with the highest rate at which it still pays off the bridge, use the bridge-to-agency takeout test. Program pages: bridge loans, Freddie Mac value-add, and refinancing a bridge loan.

Three things decide whether a value-add purchase survives: how much of the renovation budget the lender funds, how long the bridge term and extension options run, and the cost of the rate cap the lender requires on floating-rate debt. The rate cap calculator prices the cap before you commit to it.

How much you put down

Your cash at closing is the purchase price minus the loan, plus closing costs and any upfront reserves the lender collects. The loan is not simply 75% or 80% of the price. It is the smallest of the limits described above, and the gap between that number and the price is your equity.

Work it in this order. Say you are buying a building for $4,500,000 and the lender re-underwrites its NOI at $310,000.

LTV limit. At 80% of the $4,500,000 price (assuming the appraisal comes in at or above price), the LTV test allows $3,600,000.
DSCR limit. At a 1.25x minimum, the most the NOI can pay in annual debt service is $310,000 / 1.25 = $248,000. Divide that by the loan constant at your quoted rate and amortization to get the DSCR-sized loan. At a hypothetical 6.25% rate on 30-year amortization the constant is about 7.39%, so the DSCR test allows roughly $3,356,000.
The loan is the lower number, about $3,356,000, or roughly 75% of the price. The DSCR test, not the 80% LTV headline, set your down payment.
Cash to close is the $1,144,000 or so of equity, plus closing costs, plus reserves and escrows.

This is why buyers who plan around a program's maximum LTV are often surprised. Use the apartment loan calculator or the DSCR calculator on your own numbers, and the closing cost estimator for the line items, which on a purchase include the same lender, appraisal and third-party report costs as a refinance plus your own acquisition legal and title costs.

What a lender re-underwrites on a purchase

A lender financing a purchase does not accept the seller's operating statement. It rebuilds the income and expenses as the property will run under you, and several lines change simply because the building changed hands.

Property taxes after the sale

In many jurisdictions a sale resets the assessed value toward the purchase price. California, for example, reassesses real property on a change in ownership. If the seller has owned the building for a long time, the tax bill you inherit can be far below the one you will pay. Lenders underwrite the post-sale tax, not the seller's.

Say the seller pays $48,000 a year in taxes and the local effective rate applied to your $4,500,000 price would produce $72,000. That $24,000 comes straight out of NOI. At a 1.25x minimum and the same hypothetical 7.39% constant, it removes about $260,000 of loan proceeds. Estimate yours with the tax reassessment calculator before you settle on a price.

In-place income, not pro forma

Permanent lenders size on income the building collects today, usually measured over the trailing 12 months and the current rent roll. A broker's pro forma that assumes rent increases, lower vacancy or new fee income is not loan-sizing income. If the price only works on the pro forma, the deal is a value-add purchase and belongs on a bridge loan.

Expense floors and resets

Lenders apply their own minimums regardless of what the seller spent: a vacancy and credit loss floor, a management fee even if the seller self-managed, replacement reserves per unit, and current insurance quotes for your entity rather than the seller's policy. The T-12 underwriting calculator shows the gap between the seller's NOI and the lender's.

The seller's financials

You will need the seller's trailing 12-month operating statement (month by month), a current rent roll, and often the prior two years of operating statements. Write delivery of these into the purchase contract with a deadline, because the lender cannot issue a commitment without them. Lenders also compare the rent roll to bank deposits and leases, so a rent roll that does not tie to collections slows everything down. The rent roll analyzer runs the checks a lender runs.

A refinance is underwritten partly on the owner's track record with that building. A purchase is underwritten on yours. Expect requests for your schedule of real estate owned, a personal financial statement, proof of liquidity for the down payment and reserves, and, on bigger or more complex deals, your management plan.

Assuming the seller's loan

If the seller's existing loan carries a rate below what you could get today, assuming it can beat any new loan. Agency, CMBS and HUD loans are frequently assumable with the lender's or servicer's approval. Bank loans usually are not: most carry a due-on-sale clause.

What to expect on an assumption:

Approval, not automatic transfer. Fannie Mae, for example, requires the lender's prior consent to a transfer or assumption unless the loan documents permit it. You are underwritten as the new borrower, much like a new loan.
Fees and legal costs set by the loan documents and the servicer, plus third-party reports the servicer may require.
A gap to fill. The assumed balance is often well below what you need, because the seller has paid it down and the price reflects today's value. You fill the gap with more equity, a supplemental loan where the program allows one, or seller financing.
Time. Assumption approvals run on the servicer's schedule. Build that into the contract's financing deadline.

Compare the assumed loan plus the cost of the gap against a new loan over your expected hold. The term sheet comparison tool handles this if you enter the assumption as one quote. Background: loan assumption explained and Fannie Mae supplemental loans.

Order of operations on a purchase

Before you make an offer, size the loan on the seller's numbers with the post-sale tax bill, a vacancy floor and a management fee. That tells you the price the debt supports.
Negotiate a financing contingency and due diligence period long enough for the loan you chose. Agency and bank loans need weeks; HUD needs months.
Get the seller's T-12, rent roll and prior-year statements into the contract with delivery dates.
Collect quotes on the same numbers from more than one lender type, then compare them on total cost over your hold, not rate alone.
Order the appraisal, property condition report and Phase I environmental site assessment as soon as you pick a lender. They drive the timeline.
Lock the rate once the lender's sizing is final, then close.

Our step-by-step guide to buying an apartment property covers the investment side: location, brokers, due diligence and syndication. This page covers the debt.

Purchase tools

Value-add loan calculator: bridge purchase and renovation, then the agency takeout.
Bridge-to-agency takeout test: whether the permanent loan pays off the bridge.
Tax reassessment calculator: the tax bill after you buy.
T-12 underwriting calculator: the seller's NOI vs the lender's.
Eligibility checker: pass or fail against each program's published limits.
Cap rate calculator and LTV and LTC explained.

Each tool can send its numbers to the quote form, so lenders see the same inputs you used.

Frequently asked questions

How much do I need to put down to buy an apartment building?

Plan on at least 20-25% of the price plus closing costs and reserves on a stabilized purchase. Programs such as Fannie Mae Small Mortgage Loans and Freddie Mac Conventional Small allow up to 80% LTV, but the loan is also limited by a minimum DSCR, usually 1.25x. When rates are high relative to the building's NOI, the DSCR test produces a smaller loan than the LTV limit, and your down payment rises to fill the difference.

Is the loan based on the purchase price or the appraisal?

Lenders typically apply the LTV limit to the lower of the purchase price and the appraised value. If you agree to pay $5,000,000 and the building appraises at $4,800,000, an 80% LTV limit produces a loan on $4,800,000, not $5,000,000. The loan is then cut further if the DSCR or debt yield test produces a smaller number.

Can I use an agency loan to buy a building that needs renovation?

Agency small-loan programs are written for existing, stabilized properties. A building with significant vacancy or below-market rents usually does not qualify until it is stabilized. Light cosmetic work on an occupied building can still fit agency financing. A heavier renovation is normally financed with a bridge loan, then refinanced into agency debt once occupancy and rents support it.

Why does the lender use a higher property tax than the seller pays?

In many places a sale resets the assessed value toward the price you paid, so the seller's tax bill does not reflect what you will owe. Lenders underwrite the tax expected after the sale. A higher tax lowers NOI, which lowers the loan the DSCR test supports. Estimate the new bill before you agree on a price, and confirm local reassessment rules with a tax advisor.

Should I assume the seller's existing loan?

It is worth pricing when the existing rate is well below today's rates and the remaining term fits your hold. Assumptions need the lender's or servicer's approval, carry fees and legal costs, and often leave a gap between the assumed balance and the price that you fill with equity, a supplemental loan or seller financing. Compare the all-in cost to a new loan over your hold before deciding.

How long does it take to close an apartment purchase loan?

It depends on the lender type and how quickly the seller delivers financials. Bank and agency small loans typically take weeks from application, driven by the appraisal, property condition report and environmental report. HUD 223(f) takes considerably longer. Set your contract's financing deadline around the loan you actually plan to use, not the fastest one available.