Buying apartment buildings with an SBA loan might sound impossible—after all, SBA loans are for business, not pure real estate investing. But with the right strategy—especially using owner-occupied structures—you can leverage SBA financing to build a multifamily investment portfolio. Here’s your step-by-step guide to making it work.
1. Understand SBA Loan Options for Property
SBA 7(a) Loan
- Max $5 million, up to 25-year term for real estate, with down payments around 10% or more.
- Flexible use of funds—including purchase, working capital, and renovation .
- Requires you to operate a business on the property.
SBA 504 Loan
- Structured via bank + SBA + CDC: 50% + 40% + 10% down .
- Fixed interest and long terms (10–25 years).
- Properties must be owner-occupied—at least 51% .
- Cannot be used solely for passive multifamily investors .
2. Owner-Occupancy: The Key Requirement
To qualify, you generally must occupy at least 51% of the building. That means structuring an apartment scenario where:
- You live in one or more units, and
- The rest are rented out to tenants.
This turns your multifamily property into an owner-occupied commercial building, making it eligible for SBA loans .
3. Eligibility Requirements for SBA Loans
To qualify for SBA 7(a) or 504, you’ll need:
- A for-profit business operating in the U.S. (must be “owner-occupied” property) .
- Business meets SBA size requirements (typically under $5–7.5 million net income, < $15 million net worth) .
- Strong credit (usually 650+), sufficient cash flow, collateral, and character checks .
- Your business must occupy over 51% of the property .
4. Max Loan Amounts & Terms
- 7(a): Up to $5 million; up to 25-year repayment.
- 504: First mortgage (~50%), CDC (~40%), borrower (~10%). Loans up to $5 million (or $5.5 M for certain projects); fixed interest .
5. What You Can Buy With an SBA Loan
Eligible assets include:
- Mixed-use buildings (residential + your business)
- Buildings where your business operates from one or multiple units
- Office, retail, industrial, or even assisted-living tied to your active business .
Pure rental buildings or passive apartment investments without occupancy do not qualify .
6. How to Structure the Deal
- Form your business entity (LLC, S-Corp, etc.) and establish it on-site.
- Find a 2+ unit property, lease one or more units to your business, and rent out others.
- Apply for SBA 7(a) or 504, depending on needs—504 offers lower rates for real estate.
- Make your down payment (10% for 7(a), often 10–15% for 504).
- Use rental income from tenants to cover loan payments and create positive cash flow.
7. Pros & Cons of Using SBA Loans for Multifamily
Advantages
- Low down payment (usually 10%)
- Long-term fixed rates (especially 504)
- Finance up to 90% of purchase .
- Bundle working capital or improvements in one loan (7(a)).
👎 Downsides
- Must live and operate your business on the property
- Extensive SBA process & documents (especially for 504)
- Rental areas limited to under 49% of the property
- Building must support commercial/business activity
8. A Real-Life Example
You, a growing boutique fitness Studio owner:
- Purchase a 4-unit building for $1.2M
- Convert 2 units into your studio and office
- Rent 2 units for income
- Apply for SBA 504: Bank lends $600K, CDC $480K, you pay $120K down
- Benefit from stable interest, long term, and rental cover
Your fitness business goes from renting to owning, and tenants help pay down your loan.
9. Practical Tips for Success
- Work with SBA-savvy lenders via SBA Lender Match .
- Prep financial statements and tax returns.
- Choose CDCs experienced in 504 deals .
- Structure leases legally—check city zoning/licensing.
- Project rental income conservatively—NEC ≥ 1.25 for commercial lending .
Final Takeaway
While SBA loans weren’t built for passive apartment investing, with creativity and owner-occupancy structure, they offer a powerful path to acquire multifamily property with low down and favorable terms. To recap:
- Use owner-occupancy trick to qualify
- Choose between 7(a) vs 504 depending on your needs
- Meet SBA’s business-operations and size rules
- Plan rental income to support debt
- Get lenders and CDCs experienced in SBA multifamily deals
Need help finding an SBA lender, modeling pro forma rent vs payment, or prepping your business docs? I’d be happy to connect you with experts!