Multifamily Income Proforma Calculator

Apartment buildings are valued by income, not by square foot. The market sets a cap rate for the asset class and submarket, you divide stabilized NOI by that rate, and the result is what an institutional buyer will pay. A 24-unit Class B property generating $260,000 of NOI in a 6.0% cap-rate market is worth approximately $4.33 million ($260k ÷ 0.060), regardless of whether the building is 22,000 or 26,000 square feet.

Per-unit (or per-door) pricing is the second yardstick. The same $4.33M building works out to about $180,000/door. Brokers, lenders, and appraisers use per-door pricing for rapid comp checks across a submarket — if recent 1985-vintage Class B sales are trading at $165–$190/door and your underwriting comes in at $230/door, you know something in the inputs is off.

Replacement cost per door is the third triangulation point. If new construction in the submarket lands at $275/door all-in, a 1980s vintage Class B asset trading at $190/door is at a 31% discount to replacement — a margin of safety that helps justify the value-add thesis even if cap rates drift.

Start with revenue. 24 units × $1,850/month × 12 = $532,800 of gross potential rent. Apply a 5% vacancy & credit loss assumption and add $12,000 of other income (laundry, parking, pet fees), and effective gross income comes to roughly $518,160.

Subtract operating expenses: $38k taxes + $12k insurance + $18k utilities + $24k repairs + $9.6k reserves + $6k other + 5% management of EGI (~$25.9k) = about $133,500. NOI ends up around $384,600 — a 26% expense ratio on EGI, in line with stabilized Class B norms.

Capitalize that NOI at a 6.0% market cap rate: $384,600 ÷ 0.060 = $6.41M of estimated value, or about $267,000/door. Layer in 65% LTV at 6.75% over a 30-year amortization and debt service is roughly $324,000/year, producing a 1.19× DSCR — below the 1.25× Fannie Mae minimum, meaning either the LTV needs to drop to ~60% or rents need to grow before agency debt clears.

NOI = effective gross income (EGI) − all operating expenses. EGI is gross potential rent minus vacancy and credit loss, plus any other income (laundry, parking, pet fees, RUBS reimbursements). Operating expenses include property taxes, insurance, utilities not billed back to tenants, third-party management, routine repairs and maintenance, replacement reserves, and admin/marketing/turnover costs.

NOI deliberately excludes debt service (covered separately in DSCR and cash-on-cash calculations), depreciation (a non-cash accounting item), capital expenditures above the replacement reserve (which are tracked on a separate capex budget), and income taxes (entity-level, not property-level). Keeping NOI 'clean' this way is what allows cap rates to compare across deals with different financing and ownership structures.

Replacement reserves are the line most often missed by amateur underwriters. Industry practice is $250–$350 per unit per year for stabilized multifamily; new construction can use $200, while 1970s and earlier vintage often need $400–$500. Skipping reserves inflates NOI and produces a value that no professional buyer will pay.

Cap rate is an unlevered yield: NOI ÷ price. It measures the property's income relative to its value, independent of how the deal is financed. A 6% cap rate means $6 of NOI per $100 of value per year.

DSCR (debt service coverage ratio) is NOI ÷ annual debt service. Agency lenders (Fannie Mae, Freddie Mac) typically require 1.25× minimum on stabilized multifamily; bridge and value-add lenders may accept lower in-place DSCR if the pro-forma stabilized DSCR clears the threshold. A 1.25× DSCR means the property generates 25% more income than the mortgage requires, providing the cushion lenders need to feel comfortable underwriting the loan.

Cash-on-cash return is annual pre-tax cash flow ÷ total cash invested (down payment + closing costs + initial capex). It's the actual yield on your equity check. Levered cash-on-cash should exceed the cap rate when interest rates are below cap rates (positive leverage); when interest rates exceed cap rates (negative leverage), adding debt actually reduces your equity return — a regime the multifamily market entered in 2022–2023.

Class A: newer construction (typically post-2000), top-of-market rents, full amenities (pool, gym, concierge, in-unit laundry, structured parking). Lowest cap rates (sub-5% in many markets), highest per-door pricing, and lowest yields. Often institutionally owned.

Class B: workforce housing, typically 1980s–early 2000s vintage, average condition, surface parking, basic or no amenities. The bread-and-butter of private multifamily investing. Cap rates usually 50–150 bps above Class A in the same submarket.

Class C: older vintage (often pre-1980), basic finishes, may need significant capex. Often the target for value-add strategies (interior renovations, common-area upgrades, fee income additions) that push rents and re-trade at a lower cap rate after stabilization.