Phoenix DSCR Multi-Unit Loans (5–10 Units): A 2025 Rental Investor’s Guide

Phoenix’s Expanding Rental Market and Multi-Unit Investment Opportunities

Phoenix has emerged as one of the fastest-growing metro areas in the United States, attracting both domestic migration and business investment at record levels. In 2025, the city continues to experience strong population growth, driven by job opportunities in technology, healthcare, manufacturing, and education. This sustained growth has put pressure on the housing market, making rental properties a vital component of the city’s housing supply.

For investors, Phoenix offers a combination of strong rental demand, competitive property prices compared to other major metros, and favorable landlord laws. Multi-unit properties in the 5–10 unit range have become particularly appealing because they offer the ability to spread operational costs across multiple tenants, reducing the impact of vacancy on overall cash flow. This makes them a strategic fit for investors looking to build scalable rental portfolios.

Understanding DSCR Loans for Multi-Unit Properties

Debt Service Coverage Ratio (DSCR) loans are designed to assess the property’s income potential rather than relying on the borrower’s personal income. The DSCR ratio is calculated by dividing the property’s gross rental income by its total monthly housing expenses, including principal, interest, taxes, insurance, and association dues if applicable. A DSCR above 1.0 means the property generates more income than needed to cover its expenses, while higher ratios demonstrate stronger income stability.

This financing approach is especially valuable for investors with multiple properties, complex income streams, or those who reinvest earnings into new acquisitions. Launch Financial Group’s DSCR loan program requires a minimum credit score of 620, a minimum loan amount of $150,000, and is available exclusively for rental properties. This includes both short-term and long-term rentals, provided they meet applicable regulations.

Why Target 5–10 Unit Properties in 2025

Investing in mid-sized multi-family buildings can provide a balance between scalability and manageability. Properties in this range are large enough to produce substantial rental income while remaining more accessible and affordable than large apartment complexes.

One of the key advantages is operational efficiency. Managing a single property with multiple units allows for shared maintenance costs, consolidated utility management, and reduced travel time for inspections and repairs. It also provides diversification of rental income. If one tenant vacates, the loss represents a smaller percentage of total income compared to single-family or duplex properties.

In the Phoenix market, where demand for rentals is high across multiple income brackets, 5–10 unit buildings can cater to a variety of tenant profiles, from young professionals and families to retirees seeking low-maintenance housing.

Phoenix-Specific Market Insights for Multi-Unit Investors

Several neighborhoods in Phoenix offer strong potential for multi-unit investment. Downtown and Midtown have seen significant revitalization, attracting tenants who value proximity to jobs, dining, and entertainment. Arcadia combines a desirable location with steady rental demand, while areas like Tempe benefit from Arizona State University’s student population and year-round housing needs.

West Phoenix has been gaining traction with investors due to lower entry prices and improving amenities. Rental rates in these areas remain competitive, and mid-sized multi-family properties can generate attractive returns when well-managed.

Phoenix’s economic base continues to diversify, with expansions in semiconductor manufacturing, logistics, and healthcare fueling job creation. These sectors help stabilize demand for rental housing, even during economic shifts.

Loan Structuring for Phoenix Multi-Unit DSCR Financing

When financing 5–10 unit buildings, lenders pay close attention to the property’s current income performance and potential for stabilization. Loan-to-value (LTV) ratios for DSCR loans will vary depending on credit score and property type, but competitive terms are generally available for properties that meet or exceed minimum DSCR thresholds.

Documentation will typically include rent rolls, executed leases, and in some cases, a market rent appraisal to verify income potential. Lenders may also account for a vacancy factor—often around 5%—when calculating the DSCR to ensure the property can sustain minor income fluctuations.

Expense ratios are another important consideration. Properties with unusually high expenses relative to income may face closer scrutiny during underwriting. Keeping operating costs in line with market averages can improve loan terms.

Calculating DSCR for 5–10 Unit Properties

The formula for DSCR—gross rental income divided by PITIA—is straightforward, but its application in multi-unit properties can highlight the benefits of scale. For example, an 8-unit property in Phoenix generating $1,200 per unit per month would have a gross monthly rental income of $9,600. If the PITIA is $7,500, the DSCR would be 1.28, which is comfortably above many lender minimums.

This margin not only supports loan qualification but also provides flexibility for the investor to cover unexpected expenses or periods of partial vacancy without compromising loan performance.

Refinancing and Portfolio Growth Strategies

One of the most powerful uses of DSCR financing is in refinancing appreciated properties to free up capital for new investments. Phoenix has experienced steady appreciation in recent years, and strategic investors can use cash-out refinancing to expand their holdings without depleting personal savings.

By reinvesting equity into additional multi-unit properties, investors can compound their rental income and build a diversified portfolio across different neighborhoods. This approach also provides a hedge against localized market shifts.

Risk Management in Phoenix Multi-Unit Investments

While Phoenix offers many advantages, investors should remain mindful of potential risks. Tenant turnover can affect cash flow, so maintaining competitive rental rates and offering desirable amenities is key to tenant retention. Regular maintenance and capital improvements can also prevent costly repairs and keep occupancy rates high.

Market cycles should be considered, as rapid appreciation can sometimes be followed by price stabilization. Investors who focus on properties with strong income fundamentals are better positioned to weather market changes.

Step-by-Step Process for Securing a Phoenix DSCR Multi-Unit Loan

The lending process begins with prequalification, during which the lender reviews the property’s income, expenses, and estimated DSCR ratio. Once preliminary eligibility is confirmed, the investor can move forward with an appraisal and detailed underwriting.

The appraisal will confirm both the market value and income potential of the property. Underwriting will examine rent rolls, leases, expense records, and the investor’s credit profile. Upon approval, closing is scheduled, and funds are disbursed for the purchase or refinance.

Phoenix Rental Market Forecast for 2025–2030

Looking ahead, Phoenix’s rental market is projected to maintain its upward trajectory over the next five years. The city’s strong in-migration rate, fueled by both job seekers and retirees, ensures a steady pool of tenants across income levels. Tech companies, healthcare providers, and advanced manufacturing facilities are continuing to expand their presence, providing stable employment opportunities that support long-term rental demand.

Between 2025 and 2030, analysts expect average annual rent growth in Phoenix to range from 3% to 5%, with certain high-demand neighborhoods potentially outpacing this trend. Limited housing supply, due in part to the pace of new construction not keeping up with population growth, will likely sustain upward pressure on rental rates.

For multi-unit investors, this environment suggests both strong income potential and continued property appreciation. Well-located 5–10 unit buildings in transit-accessible or amenity-rich areas are particularly well-positioned to capture consistent demand from tenants seeking affordability relative to single-family homes.

Detailed DSCR Calculation Example for a Phoenix Multi-Unit Property

Consider an investor purchasing an 8-unit property in Midtown Phoenix for $1.9 million. Each unit rents for $1,350 per month, resulting in a gross monthly rental income of $10,800. Annual gross income is $129,600.

Assume the monthly PITIA on the DSCR loan is $8,200. The DSCR ratio would be calculated as:

$10,800 ÷ $8,200 = 1.31

This figure is comfortably above many lender minimums, demonstrating that the property generates 31% more income than is needed to cover debt obligations. This margin allows for operational flexibility, making it easier to handle minor vacancies, unexpected repairs, or temporary market fluctuations without jeopardizing loan performance.

If the investor later refinances after several years of rent growth, the improved DSCR could allow them to pull equity from the property to finance additional acquisitions.

Zoning, Permitting, and Landlord Compliance in Phoenix

Operating a 5–10 unit property in Phoenix requires an understanding of local zoning and compliance requirements. The city’s zoning code dictates where multi-family properties can be located and may impose density restrictions or parking requirements. Investors should verify zoning before purchase, especially if considering adding units or making significant alterations.

Permits are required for most structural changes, electrical work, or plumbing upgrades. Properties must meet health and safety codes, which include requirements for smoke detectors, accessible exits, and regular pest control. Older buildings may require updates to comply with current building codes, and these costs should be factored into acquisition and renovation budgets.

Phoenix is generally considered landlord-friendly, with relatively straightforward eviction processes and the ability to collect market rents without rent control restrictions. However, landlords must still comply with Arizona’s Residential Landlord and Tenant Act, which outlines maintenance responsibilities, tenant rights, and notice periods for rent increases or lease terminations.

Maintaining compliance not only helps avoid costly disputes but also protects the property’s financing eligibility. Lenders often request proof that the property meets code requirements and has no outstanding violations as part of the underwriting process.

Positioning for Long-Term Success in Phoenix’s Multi-Unit Sector

By combining sound acquisition strategies with DSCR financing, Phoenix investors can build portfolios that generate stable cash flow and appreciate over time. Properties in the 5–10 unit range strike a balance between operational efficiency and manageable scale, allowing investors to take advantage of strong rental demand while keeping management complexity reasonable.

With careful due diligence, ongoing maintenance, and proactive tenant management, multi-unit properties can serve as a cornerstone for a long-term rental investment strategy in one of the country’s fastest-growing metropolitan areas.

Working with a Lender Experienced in Phoenix DSCR Multi-Unit Financing

Partnering with a lender who understands both DSCR underwriting and the Phoenix market can make the process smoother and more efficient. Launch Financial Group specializes in investor-focused financing, structuring loans that align with both short-term acquisition goals and long-term portfolio strategies.

Final Insights for Phoenix Multi-Unit Investors in 2025

The combination of strong population growth, economic diversification, and rental demand makes Phoenix a prime market for investing in 5–10 unit properties. DSCR loans offer a flexible financing solution that prioritizes property performance over personal income, allowing investors to qualify for higher-value assets and scale their portfolios more quickly.

For investors who focus on well-located properties, maintain solid DSCR ratios, and manage risk effectively, 2025 offers significant potential to grow and stabilize income in the Phoenix multi-unit sector.