Multifamily Analysis Calculator Formula

Understand the math behind the multifamily analysis calculator. Each variable explained with a worked example.

Use the Multifamily Analysis Calculator

Formulas Used

Annual Cash Flow

annual_cash_flow = noi - annual_debt

Cap Rate

cap_rate = purchase_price > 0 ? noi / purchase_price * 100 : 0

Cash-on-Cash Return

cash_on_cash = down_payment > 0 ? (noi - annual_debt) / down_payment * 100 : 0

Debt Service Coverage Ratio

dscr = annual_debt > 0 ? noi / annual_debt : 0

Net Operating Income

net_operating_income = noi

Price Per Unit

price_per_unit = purchase_price / num_units

Operating Expense Ratio

expense_ratio = egi > 0 ? annual_operating_expenses / egi * 100 : 0

Variables

VariableDescriptionDefault
num_unitsNumber of Units8
avg_rent_per_unitAverage Monthly Rent Per Unit(USD)1200
other_income_monthlyOther Monthly Income (laundry, parking)(USD)400
vacancy_rateVacancy Rate(%)8
annual_operating_expensesAnnual Operating Expenses(USD)48000
purchase_pricePurchase Price(USD)800000
down_payment_pctDown Payment(%)25
interest_rateLoan Interest Rate(%)7
loan_term_yearsLoan Term(years)30
gross_potential_rentDerived value= num_units * avg_rent_per_unit * 12calculated
other_annualDerived value= other_income_monthly * 12calculated
gpiDerived value= gross_potential_rent + other_annualcalculated
vacancy_lossDerived value= gross_potential_rent * vacancy_rate / 100calculated
egiDerived value= gpi - vacancy_losscalculated
noiDerived value= egi - annual_operating_expensescalculated
down_paymentDerived value= purchase_price * down_payment_pct / 100calculated
loan_amountDerived value= purchase_price - down_paymentcalculated
rDerived value= interest_rate / 100 / 12calculated
n_monthsDerived value= loan_term_years * 12calculated
monthly_debtDerived value= r > 0 ? loan_amount * r * pow(1 + r, n_months) / (pow(1 + r, n_months) - 1) : loan_amount / n_monthscalculated
annual_debtDerived value= monthly_debt * 12calculated

How It Works

Multifamily Property Analysis

Multifamily investing requires evaluating income, expenses, and financing to determine whether a property meets your return requirements.

Income Analysis

  • Gross Potential Income: Total rent if 100% occupied + other income
  • Effective Gross Income: GPR minus vacancy and credit losses
  • Net Operating Income: EGI minus operating expenses

    • Key Metrics

  • Cap Rate: NOI / Purchase Price (measures property return)
  • Cash-on-Cash: Cash Flow / Cash Invested (measures investor return)
  • DSCR: NOI / Annual Debt Service (lenders want 1.25+)
  • Price Per Unit: Quick comparison metric for similar properties

    • Expense Guidelines

  • Operating expenses typically run 35-50% of EGI for multifamily
  • Include: management, maintenance, insurance, taxes, utilities, reserves
  • Exclude: debt service, depreciation, capital expenditures

    • Worked Example

    8-unit building at $800,000, 25% down, 7% rate, 30yr. Average rent $1,200/unit, $400/mo other income, 8% vacancy, $48,000 annual expenses.

    num_units = 8avg_rent_per_unit = 1200other_income_monthly = 400vacancy_rate = 8annual_operating_expenses = 48000purchase_price = 800000down_payment_pct = 25interest_rate = 7loan_term_years = 30
    1. 01Gross potential rent: 8 x $1,200 x 12 = $115,200
    2. 02Other income: $400 x 12 = $4,800
    3. 03GPI: $115,200 + $4,800 = $120,000
    4. 04Vacancy loss: $115,200 x 8% = $9,216
    5. 05EGI: $120,000 - $9,216 = $110,784
    6. 06NOI: $110,784 - $48,000 = $62,784
    7. 07Down payment: $800,000 x 25% = $200,000
    8. 08Loan: $600,000 at 7% for 30yr = $3,992.09/mo = $47,905/yr
    9. 09Cash flow: $62,784 - $47,905 = $14,879
    10. 10Cap rate: $62,784 / $800,000 = 7.85%
    11. 11Cash-on-cash: $14,879 / $200,000 = 7.4%
    12. 12DSCR: $62,784 / $47,905 = 1.31

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