Multifamily Calculator

Enter each unit’s rent (the rent roll) and see what the whole building leaves you each month.

Sample4-unit building for $499,000, $6,300 a month in rent, 20% down at 7%

This deal works

Strong cash flow, and the rent covers the mortgage with room to spare.

$849

a month for the whole building, after the mortgage and all costs, on $114,770 of your cash

Biggest risk

It stops working if the rent roll falls below $5,183 a month.

The numbers behind it

Cap rate8.4%

The return if you paid cash, so two different prices can be compared.

Cash-on-cash return8.9%

Your yearly profit measured against the cash you actually put in.

Debt coverage (DSCR)1.32

Whether the rent covers the mortgage. Most lenders want 1.25 or better.

What changes once a property has more than one unit

The rent roll replaces the rent: A seller’s sheet quotes every unit as rented at market. The roll is where the empty one shows up. Enter what each unit is listed at and mark the ones with nobody in them, and the answer tells you what the building earns once they are rented, not what it earns today.
Five units changes the loan: A regular home loan stops at four units. At five a lender treats the property as commercial: it sizes the loan on what the building earns rather than on your income, and the note usually comes due years before it is paid off. Both are set under Financing, and the difference between what the loan-to-value allows and what the income supports comes out of your pocket.
Price per unit is how buildings get compared: Two buildings at very different prices can be the same deal. Price per unit and rent per unit are what let you set them beside each other, and beside what else has sold nearby.
Running costs are a bigger share than people expect: On an apartment building, operating costs usually land between 40 and 50% of the income before any mortgage. Well under that usually means something is missing rather than a bargain: water and sewer, trash, common-area power, lawn care, snow, or a resident manager.

How the multifamily calculator works

The multifamily calculator works on anything from a duplex to a building of 75 units. Enter the rent roll unit by unit and it shows what the building earns, what it costs to run, and whether the rent covers the loan. The sample fourplex keeps $849 a month.

How is a building’s cash flow worked out?

Add up the rent roll, set some aside for empty units, take off the running costs, then the mortgage.

On the sample, four units at $1,575 bring in $6,300 a month. After 6% for empty units, $5,922 comes in. Running costs take $2,417, including $450 of utilities the owner pays, which leaves $3,505 before the loan. The mortgage takes $2,656, so $849 a month is left.

When does DealLevel say a building works?

By the same three tests as a house.

This deal works when it makes money every month, the cash you put in earns at least 8% a year, and the rent covers the mortgage at least 1.25 times after running costs.
Cutting it close when it makes money but misses one of those bars.
This deal doesn’t work when it loses money every month.

The sample earns 8.9% a year on $114,770 of cash in, and the rent covers the mortgage 1.32 times.

What would make it stop working?

For the sample it is the rent roll. If it falls below $5,183 a month, the building loses money.

Which numbers make a building look better than it is?

The seller’s rent roll without the leases. The twelve numbers to confirm before you buy.
An FHA loan on three or four units without its rent test. The FHA self-sufficiency test, worked through.

Articles on this

How to analyze a duplex: a worked example
Analyze a duplex on the rent each unit can get today, not the seller’s hoped-for rents. In this example the seller’s rents show $233 a month of cash flow, today’s rents show a $142 loss, and with one unit empty the building collects half its rent.
How to analyze a multifamily property, step by step
Build the income from the rent roll, take off a vacancy allowance and every running cost, then subtract the mortgage and test what an empty unit does. In this example, a $460,000 fourplex clears $938 a month with all four units let and $285 while one of them sits empty.
What is negative leverage in real estate?
Negative leverage is borrowing at a cost higher than the building earns, so the loan lowers your return instead of lifting it. In this example a fourplex pays 8.9% on borrowed money at $499,000 and loses 4.1% a year at $700,000, where its 5.4% cap rate sits under the 8.0% the loan costs.
Value add multifamily: what a rent raise is worth
Value add means raising a building’s net operating income, because a building is priced off its income rather than off what similar houses sold for. In this example, $150 more a unit on a fourplex adds $5,472 a year of net income, worth $78,171 at a 7% cap rate, and monthly cash flow goes from $849 to $1,305.
Can a first-time buyer buy an investment property?
Nothing stops a first-time buyer from buying a rental. What changes is the loan: the cheap low-down-payment programs all require you to live in the property. In this example the same $499,000 fourplex needs $139,720 of cash as an investment, or $32,435 with FHA if you move into one unit.