You can put several small residential properties under one commercial loan, but only if they are contiguous. A bulk residential portfolio whose properties are scattered — different blocks, different neighborhoods, different towns — is a named ineligible property type in our small balance commercial program, and there is no file-strength argument that gets around it.
That is the whole answer. The rest of this page explains where the line sits, why a lender draws it there, what a contiguous portfolio has to look like to qualify, how it gets valued, and what an investor with scattered houses should do instead. The last one matters: scattered is not a dead end. It is a different product on a different guideline.
The ineligible entry, stated plainly
Our small balance commercial guideline maintains a list of property types the program will not finance. One of the entries on that list is bulk residential non-contiguous.
Two entries sit near it on the same list and matter here. Residential condos are ineligible. And 1-4 unit residential is routed expressly to a separate set of guidelines rather than underwritten by the commercial program at all.
Read the three together and the pattern is clear: this program is not built to underwrite houses as houses. It underwrites a single income-producing commercial asset. Everything below is downstream of that. For the full collateral list, see [property types commercial lenders will not finance](/blog/what-property-types-commercial-lenders-will-not-finance); here we stay on contiguity.
What "contiguous" actually means
The guideline gives contiguity a working definition rather than leaving it to intuition, and the definition is more generous in one direction and stricter in another than most borrowers expect.
Two things in that paragraph do most of the work.
The right-of-way carve-out is the generous direction, and it surprises people who assume any public street breaks the chain. Two buildings facing each other across a residential street, operated together, can still read as contiguous.
The "randomly scattered" exclusion is where that carve-out stops. The guideline explicitly contemplates buildings scattered throughout a city block, or across blocks separated by rights-of-way, and says those are not contiguous. The street carve-out is not a loophole for assembling a neighborhood-wide collection; it exists so a genuine single complex does not lose its classification over an accident of platting.
The operative phrase is managed and maintained in an efficient manner as a single complex. That is the test the rest of the language serves. If one superintendent, one landscaping contract and one leasing sign can reasonably cover the whole thing, you are in contiguous territory. If running the portfolio means driving between locations, you are not.
| Situation | Reads as contiguous | Why |
|---|---|---|
| Four buildings sharing a lot line, one owner, one management office | Yes | Adjacent or abutting; manageable as a single complex |
| Two buildings facing each other across a public street, operated together | Generally yes | A public right-of-way does not break the contiguous theme |
| Six buildings dotted around one city block with other owners in between | No | Expressly described as randomly scattered |
| Houses in three neighborhoods across the same city | No | Not adjacent; cannot be managed as a single complex |
| Houses in two different states | No | Bulk residential non-contiguous |
Note the last sentence of the rule: determining contiguity is a discretionary call by our real estate review team, not a formula. A borderline site plan is a question to ask before you order anything, not after.
Why a lender cares about contiguity at all
This is not aesthetic preference. Contiguity changes what the lender is actually holding.
One appraisal instead of many. A contiguous complex is appraised as one property with one income stream. A scattered collection needs a valuation on every address, each with its own comparable set, market and condition findings — more cost, more time, more places for a report to come back short.
One market instead of many. The guideline separately requires the properties be homogenous within their market. A single complex sits in one submarket with one set of rent comparables. A scattered portfolio can straddle a strong submarket and a declining one, and the lender inherits both.
One management story. The efficiency language is a credit statement disguised as a geography statement. Scattered residential is expensive to operate, and operating expense is what stands between the rent roll and the debt service. Turnover means a different vendor and a different commute for every address.
One marketable asset at the end. Borrowers rarely think about this; lenders never stop. On a default, a contiguous complex is one thing to sell, to one buyer, in one transaction. A scattered collection is unwound address by address, strongest first, weakest left over. Recovery is worse and slower, and front-end pricing has to reflect that.
Zoning. There is also a hard structural reason a bag of houses does not fit the commercial program. The subject property must be commercially zoned — retail, office, multi-family or industrial. Properties zoned residential or agricultural are prohibited. Ordinary single-family houses in residential zones fail that test before contiguity is even reached.
How a contiguous portfolio is treated
If your properties are genuinely contiguous, the guideline has a category for them. It is called Bulk Contiguous, and it can be classified Tier I or Tier II.
The gates, as the guideline writes them:
- Single ownership of five or more residential properties. Five is the floor, consistent with the multi-family definition, which requires a minimum of five total units.
- At least one parcel must include a commercial component. The requirement that surprises everybody; discussed on its own below.
- Multiple tax lots. The category exists for portfolios spread across more than one tax lot.
- Contiguous, homogenous within their market, and historically operated as a single entity. Three separate tests. Operating history matters: the question is whether the properties have been run as one thing, not whether they could be.
That valuation sentence is the most financially consequential line on this page.
What single-entity valuation does to your number
Aggregate valuation asks what each house is worth to a retail buyer, added up. Single-entity valuation asks what the complex is worth to an investor buying an income stream. Those are different numbers, and which is higher depends entirely on the market. Where owner-occupant demand is strong, houses can be worth more one at a time than their rent justifies as a bundle. In a rental-dominated market, the reverse is often true.
On the appraisal itself: reports are required on all property types and must be USPAP and FIRREA compliant. We typically order both the sales and income approaches to value, though an appraiser may provide only one on a case-by-case basis where the omission is reasonably explained. For some multi-family and mixed-use properties, FHLMC 71A or 71B forms with adequate addenda may be accepted on a case-by-case basis. Both are case-by-case allowances, not entitlements.
The commercial component is the part people miss
Read the Bulk Contiguous gates again and notice what is not optional: at least one parcel must include a commercial component.
This disqualifies most people who arrive at this category. An investor with five adjacent houses, all residential, all on separate tax lots, satisfies contiguity and satisfies the count — and still does not fit, because nothing in the collection carries a commercial component.
Bulk Contiguous is not a mechanism for financing a row of houses. It finances a mixed assemblage — residential buildings anchored by a parcel with commercial use — as one asset, on one loan, under one valuation. If everything you own is residential, it is not your category. Two other paths are.
If your units are condominium units under one owner
The multi-family definition contains a provision that some investors qualify for without realizing it. Bulk residential condos may be included as multi-family: a multi-unit residential property in which owners hold fee simple title to individual units plus an undivided interest in common areas.
It requires single ownership of five or more residential condominium units in the same property, 100% ownership of the entire condominium project, and operation as multi-family. No fractured ownership is permitted — if someone else owns even one unit in the project, this does not apply to you. Plain residential condos remain on the ineligible list; this is a narrow whole-project exception, not a general opening.
The other rules that come with multi-family treatment
Because Bulk Contiguous is valued as multi-family, the multi-family operating rules come along with it:
- Every unit must have a full and legal kitchen.
- Units must be rented on a non-transient basis, such that tenants consider the unit their permanent residence. Properties offering weekly or monthly housing are an ineligible property type.
- Units used for short-term rental platform stays are deemed vacant for underwriting. If a meaningful share of your portfolio runs nightly, this moves your numbers.
- There is no minimum value on a per-unit basis, but there must be a minimum of five total units.
- Rent controlled or stabilized properties in New York are ineligible. We reserve the right to review such regulations in other states for long-term marketability impact. That is a reservation, not a restriction — the review happens; it does not put a given state out.
If you do qualify: the parameters you are underwriting to
Assume your assemblage clears the property-type gates. These are the core investor parameters it then has to meet.
| Parameter | Investor purchase | Investor cash-out / refinance |
|---|---|---|
| Loan size | $100K to $2.5MM | $100K to $2.5MM |
| Maximum LTV | 80% for loans with FICO of 725 or higher | 75% |
| DSCR | 1.15x | 1.15x |
| Minimum occupancy | 75% | 75% |
| Stabilization | 75% occupancy over a 90-day trailing underwriting period | 75% occupancy over a 90-day trailing underwriting period |
| Underwriting method | Property DSCR | Property DSCR |
Two adjustments to hold in mind: properties meeting MSA requirements but deemed rural by the appraiser carry a maximum LTV of 60%, and the special use permit situation above caps at 50%.
Whether your file is underwritten as investor or owner-occupied is a separate determination with its own test, and it changes the DSCR standard and the underwriting method. That determination is covered here: [owner-occupied versus investor commercial property classification](/blog/owner-occupied-vs-investor-commercial-property-classification).
Scattered houses: the 1-4 unit portfolio route
The commercial guideline sends 1-4 unit residential to a separate set of guidelines. On that side there is a portfolio product built specifically to put multiple 1-4 unit investment properties under a single loan. Scattered geography is not a disqualifier there, because that guideline underwrites houses as houses.
It is a different product on a different guideline document, with different terms — not the commercial program with a waiver. The figures below come from our DSCR program guidelines, V28:
| Portfolio requirement | Figure |
|---|---|
| Minimum properties in one loan | 3 |
| Maximum properties in one loan | 25 |
| Minimum loan amount | $500,000 |
| Maximum loan amount | $6,250,000 |
| Minimum DSCR | 1.0 |
| Minimum asset value per property | $100,000 |
| Maximum asset value per unit | $1.5M (so $3.0M on a 2-unit) |
| Borrower experience | Must be an experienced investor |
Maximum leverage on that structure moves with credit score:
Those are maximum purchase LTVs by minimum credit score tier under the portfolio eligibility matrix. Rate-and-term and cash-out maximums are lower at the 680 and 660 tiers, and the 660 tier is limited to 1-unit properties.
A few structural points from the same guideline that shape how these deals get built:
- If more than 25% of the properties have individual DSCRs between 0.75 and 0.99, maximum LTV is reduced by 10%. A few weak addresses drag the whole loan.
- If 25% or more of the properties are condominiums, 2-4 units, or a combination, pre-approval is required.
- Different property types can be collateralized together, but pricing and eligibility follow the most restrictive property type in the cross.
- Partial releases may be permitted at a release price of at least 120% of the allocated loan amount per property, allocated proportional to appraised values. If you intend to sell houses out of the portfolio later, that is the mechanism and 120% is what it costs.
- Blanket mortgages are not permitted for inexperienced investors. The experience test turns on 12 consecutive months owning and managing commercial or non-owner-occupied residential real estate in the most recent three years, or ownership in three or more properties each for at least 12 months over the past 24 months.
How to tell which side of the line you are on
Work through these in order. The first "no" tells you which guideline you belong on.
1. Are the properties adjacent or abutting, allowing for public rights-of-way? If they are scattered around a block or across neighborhoods, stop — this is bulk residential non-contiguous.
2. Could one management operation efficiently run them as a single complex? If it requires driving between sites, treat the answer as no.
3. Five or more residential properties under single ownership, on multiple tax lots?
4. Does at least one parcel carry a commercial component? If not, Bulk Contiguous does not fit and the 1-4 unit portfolio route is the conversation.
5. Are the parcels commercially zoned? Residential and agricultural zoning is prohibited, subject only to the special use permit exception at 50% LTV.
6. Have they historically been operated as a single entity?
7. Does the single-entity income valuation support the loan you want — not the sum of individual house values?
What this page does not do
This page explains a property-type classification. It is not an approval, a pre-approval, a quote, a rate, or a commitment to lend. Nothing here reserves terms or fixes pricing.
It does not price your loan. Pricing is determined by loan program, property type, credit score, LTV, amortization term, loan amount and occupancy, and it moves. No rate appears here for that reason.
It does not resolve the ambiguous exclusion language in the Bulk Contiguous entry. Where the source text is not clean, we said so rather than publishing a reading of it.
It does not decide your zoning, your permitted use, or whether a special use permit is available to you — those go to your municipality's planning department and your attorney. Tax treatment of a portfolio consolidation and the entity structuring around it go to your accountant and your attorney.
It does not cover the full ineligible property type list or the owner-occupied versus investor determination, both linked above. It does not address the downstream file: reserves, guarantor documentation, insurance, title and survey work across multiple tax lots, prepayment structure, or third-party report timing. Those are settled on your actual file, after classification.
And it does not tell you whether your assemblage is contiguous. That is a discretionary determination made on documents. What this page gives you is the ability to walk into that conversation knowing what is being looked at, and why.
Guideline SBC 08/03/2026 · Reviewed August 31, 2026
Published September 1, 2026 · Updated September 1, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.