Phoenix multifamily lending

Short answer: Stabilized 5–20 unit multifamily in metro Phoenix trades at roughly 5.25%–6.25% cap rates with rent growth near flat at +1.4% YoY. Most deals here are DSCR-binding — cash flow, not appraised value, sets your loan size — and DSCR lenders typically want around 1.25.

Phoenix at a glance

Phoenix multifamily compressed dramatically through 2021–2022 and has been re-pricing ever since. Stabilized 5–20 unit caps are back into the 5.25–6.25% range, with rent growth near flat (+1.4% YoY) as new supply has been absorbed.

Is Phoenix DSCR-binding or LTV-binding?

At a 5.75 cap and current DSCR-loan rates, an 8-unit Phoenix deal is DSCR-binding, not LTV-binding. That means the loan size is determined by cash flow, not by appraised value. Your max loan can be 5–10% below 75% LTV.

Underwriting nuances

• Insurance. Lower than coastal storm metros — typically +9% YoY.
• Tax. Arizona's class-9 / class-4 distinction matters. Owner-occupied vs. rental class can move the bill 20%.
• Water. Submetering is a meaningful CapEx item but pays back in 18–30 months.

Recent comparable activity

5–20 unit transactions in Glendale, Mesa, and Tempe have clustered in the $140k–$200k/unit range, with cap-rate spread driven mostly by physical condition rather than location.

PathIQ supports the Arizona property-class tax flag and pulls comp activity automatically.

Frequently asked questions

What are cap rates in Phoenix right now?

Stabilized 5–20 unit product is trading around 5.25%–6.25% after re-pricing off the 2021–2022 compression. Newer, well-located product sits near the low end, while older value-add deals price toward the high end.

Why is Phoenix DSCR-binding instead of LTV-binding?

At a 5.75 cap and current DSCR-loan rates, cash flow — not appraised value — sets your loan size. That can put the max loan 5–10% below 75% LTV, so most Phoenix deals hit the DSCR floor (around 1.25) before they hit the LTV ceiling.

How does Arizona property tax affect underwriting?

Arizona's class-9 / class-4 distinction matters: whether a property is treated as owner-occupied or rental can move the tax bill by about 20%. Underwrite the rental class so year-2 taxes reflect the correct rate.

What's rent growth like in the Phoenix metro?

Rent growth is near flat at about +1.4% YoY as newly delivered supply has been absorbed. Underwrite conservative rent growth rather than assuming a return to the double-digit gains of 2021–2022.