Underwrite an apartment building from gross potential rent to cash-on-cash return. Apartment buildings are valued on the income they produce. The DealWorthIQ multifamily calculator follows the standard underwriting path: from gross potential rent, through vacancy, concessions, bad debt, and operating expenses, to NOI, and then to debt coverage, cap rate, and the return on your cash.
Formulas behind the Multifamily Calculator
Effective gross income (EGI): Gross potential rent − vacancy − concessions − bad debt. What the property should actually collect in a year.
Net operating income (NOI): EGI − operating expenses (taxes, payroll, repairs, insurance, utilities, contract services, admin, marketing, management fee). The management fee is a percentage of EGI.
Debt coverage ratio (DCR): NOI ÷ annual debt service. Lenders usually want 1.20 to 1.25 or higher on apartment loans.
Cash flow before taxes: NOI − capital reserves − annual debt service. Capital reserves set money aside for roofs, HVAC, and other big-ticket replacements.
Cash-on-cash return: Cash flow ÷ (down payment + closing costs + loan points + other acquisition costs). The yearly return on the cash it takes to buy the property.
Cap rate: NOI ÷ purchase price. Compare it with the cap rates similar buildings trade at in the same market.
Frequently asked questions
How do you underwrite a multifamily property?
Start with gross potential rent, subtract vacancy, concessions, and bad debt to get effective gross income, then subtract operating expenses to get NOI. From NOI you can test the loan (debt coverage), compare value (cap rate), and measure your return (cash-on-cash).
What DSCR do lenders require for apartments?
Many lenders look for a debt coverage ratio of about 1.20 to 1.25 or higher. The calculator shows your ratio so you can see whether the deal is likely to support the loan you want.
What expenses should I include?
Include property taxes, payroll, repairs and maintenance, insurance, utilities the owner pays, contract services, general and administrative costs, marketing, and a management fee. Add capital reserves separately.