Multifamily Underwriting Calculator for Small Investors: Run the Numbers Before You Make an Offer

The napkin math on multifamily looks incredible until you run the real numbers. That six-unit you found for $550,000 with $6,600 in gross monthly rent? The "20% expense ratio" your wholesaler quoted isn't how operating expenses work in the real world. Run a proper multifamily underwriting calculator and that deal goes from a projected 15% cash-on-cash to 9.5% — still worth buying, but an entirely different conversation about price and capital.

This is how you build the model.

What Actually Goes Into a Multifamily Underwriting Calculator

A multifamily deal has layers that single-family underwriting skips entirely. Here's the stack, top to bottom:

Gross Scheduled Income (GSI) — every unit at market rent, 100% occupied, 12 months. This is your theoretical ceiling. It's not what you'll collect; it's the starting number you work down from.

Vacancy and credit loss — multiply GSI by your vacancy assumption. In most Midwest B/C markets, 7% is defensible. In tight coastal markets, 3–4%. In rural or D-class markets, 10–12%. Never use 0%, not even when the seller tells you the building has "never had a vacancy."

Effective Gross Income (EGI) — GSI minus vacancy. This is the realistic top line.

Operating expenses — where small investors get killed. The real line items:

• Property taxes: Pull the county assessor. In many states, assessed value resets to your purchase price after the sale. Model at the new assessment, not what the seller currently pays.
• Insurance: Call a local broker. Multifamily insurance costs more per unit than single-family. Budget $350–500 per unit per year at minimum; more for older construction.
• Property management: 8–10% of collected rents. If you're self-managing, you still model this. You'll either sell eventually or burn out — either way, someone has to price it.
• Maintenance and repairs: 5% of GSI for a stabilized asset in reasonable condition. Double it for anything built before 1980 with deferred maintenance.
• CapEx reserves: Keep this separate from maintenance. Roof, HVAC, plumbing, electrical, water heater, appliances — budget $1,000–1,500 per unit per year into a reserve bucket. It won't all hit in year one. Some of it will hit every year.
• Utilities: Anything landlord-paid — water, sewer, trash, common-area electric — goes here. In 2–4 unit legacy buildings, this frequently surprises buyers who didn't ask for the utility bills.
• Landscaping and miscellaneous: $500–1,500 per year depending on unit count and climate.

Net Operating Income (NOI) = EGI minus total operating expenses. This is the number that matters most. Everything downstream — cap rate, DSCR, valuation — is a function of NOI.

Debt service — principal and interest on your mortgage, calculated separately from NOI. NOI is a property metric that ignores how you financed it. Debt service depends on your specific loan terms.

Annual cash flow = NOI minus annual debt service. This is what actually deposits into your account.

A 6-Unit Deal, Modeled Line by Line

Six units at $1,100/month each. $550,000 asking price. Seller's pro forma says 20% expenses and $52,800 NOI. Here's what the actual underwrite produces:

Revenue:

• Gross Scheduled Income: $79,200
• Vacancy (7%): −$5,544
• Effective Gross Income: $73,656

Operating expenses:

• Property taxes (confirmed with assessor): $5,200
• Insurance ($417/unit × 6): $2,500
• Property management (9% of EGI): $6,629
• Maintenance and repairs (5% of GSI): $3,960
• CapEx reserves ($1,200/unit × 6): $7,200
• Landlord-paid water/trash: $1,560
• Landscaping and misc: $600
• Total operating expenses: $27,649

NOI: $73,656 − $27,649 = $46,007

Cap rate at $550,000 asking price: $46,007 / $550,000 = 8.4%

The seller's "20% expense ratio" implied $63,360 NOI. The real NOI is $46,007. That's a $17,353 gap — not because anyone lied, but because sellers routinely omit CapEx reserves, understate management costs, and use last year's taxes before the reassessment.

Now add debt service. 25% down = $137,500. Loan: $412,500 at 7.2% over 30 years ≈ $2,804/month = $33,648/year.

Annual cash flow: $46,007 − $33,648 = $12,359

Cash-on-cash: $12,359 / $137,500 = 9.0%

Nine percent cash-on-cash at a time when a money market pays 4.5% isn't a bad deal — but it's not the 18% the seller's math implied. The difference between those two numbers determines whether you refinance from strength in two years or you're feeding the property from your W-2 after a roof hits.

At $480,000 instead of $550,000 — the number you'd negotiate to if you showed the seller this model — the cap rate is 9.6%, the CoC is 12.1%, and you have real margin.

DSCR: What Lenders See When They Score Your Deal

Before you make an offer, run DSCR. Lenders use it to determine whether the property's income covers the mortgage payment on its own.

DSCR = NOI ÷ Annual Debt Service

For this deal: $46,007 ÷ $33,648 = 1.37x DSCR

Most conventional multifamily lenders and DSCR portfolio lenders want 1.20–1.25x minimum. At 1.37x, this deal qualifies. At 1.15x, you'd need to renegotiate price, bring more down, or find a lender with looser coverage requirements.

DSCR loans have become the primary financing vehicle for investors acquiring small multifamily without using W-2 income for qualification. The lender underwrites the property, not the borrower's tax returns. The trade-off is typically a higher rate than agency financing — understand how that hits your cash-on-cash before you close. DSCR loan underwriting walks through how lenders actually score the deal and the common triggers for a decline.

One practical note: the lender's underwriter will run their own NOI calculation, and it will not match yours. They'll use their own vacancy assumption, their expense ratios, and appraiser-derived rents. If your numbers are aggressive, their version of the deal will look worse than yours. The surprise appraisal at the worst moment is one of the most common ways small multifamily acquisitions fall apart. Model your DSCR with the lender's likely inputs before you're 30 days into a purchase contract.

Cap Rate vs. Cash-on-Cash: They Answer Different Questions

These two metrics are used interchangeably by people who don't understand either. They answer fundamentally different questions.

Cap rate measures property value independent of how you financed it. It's what the building produces per dollar of purchase price, assuming no mortgage. Cap rate = NOI ÷ purchase price. Use it to compare deals across different markets, price points, and asset types without the noise of different financing structures.

Cash-on-cash return measures your yield as an investor given your actual capital structure. It's what your down payment earns. CoC = annual cash flow ÷ total cash invested (down payment + closing costs + immediate upfront repairs). This is the metric that tells you whether this deal is worth your equity capital.

A deal with a strong cap rate can produce terrible cash-on-cash at current interest rates. An 8% cap with 7.2% financing leaves almost no spread before expenses eat it. That same 8-cap deal financed at 4.5% in 2021 was a 14% cash-on-cash play. The property didn't change; the investor's return did.

Run both numbers on every deal. Use cap rate to evaluate whether you're buying at a fair market price for the income stream. Use cash-on-cash to decide whether the deal works for your capital and your investment goals. If a seller is marketing a deal on cap rate and won't discuss cash-on-cash at current rates, ask yourself why.

Where Small Investors Get the Multifamily Math Wrong

Using market rent instead of in-place rent for year one. If you're buying a building where units are $200 below market, you don't start collecting market rent on day one. Natural turnover might take 18–24 months, with vacancy and make-ready costs along the way. Model in-place rent for year one, then escalate toward market in years two and three.

Underestimating CapEx on 6–12 unit buildings. The math is brutal. Six units with one 15-year-old HVAC system per unit is $18,000–30,000 in near-term CapEx, all hitting around the same time. Roof on a six-unit with a flat membrane — $15,000–25,000. Model the reserves or get surprised when you're trying to fund the next deal.

Missing landlord-paid utilities in legacy 2–4 unit buildings. Older duplexes frequently have a single water meter, shared electric for common areas, or trash service the seller has been paying without disclosing it on the pro forma. Ask for 12 months of utility bills, not just the rent roll.

Anchoring on the seller's pro forma. Every seller-provided pro forma understates expenses and overstates rents. Treat it as your question list, not your underwriting basis. Get 12 months of actual bank statements and actual utility bills.

Not stress-testing the refinance. If your thesis includes a cash-out refi in year two to fund the next acquisition, model the exit value at flat appreciation. Don't assume 8% per year. What does the property need to appraise at for the refi to produce useful cash? Is that realistic given current cap rate compression in your market?

Run the Numbers Before You Send Earnest Money

A complete multifamily underwriting calculator — GSI, vacancy, every expense line, NOI, DSCR, cap rate, cash-on-cash, sensitivity to rate changes — takes 20–30 minutes to build on a deal. Those 30 minutes will tell you whether the $550,000 asking price makes sense or whether you need to negotiate to $480,000 to hit your return targets.

Most deals don't survive a real underwrite. That's not a failure — it's the model doing its job. You want to know before the earnest money hits, not when the first CapEx surprise hits six months in.

If you have a deal in front of you and want a second set of eyes on the model, submit it on dre1mery.com. Post the rent roll, the expense history, and the asking price alongside your model — other investors can review the assumptions and flag what you might have missed.

For a single-family or small multifamily underwrite from scratch — vacancy, operating expenses, financing, returns — the rental property underwriting walkthrough covers the same line-by-line approach. If you're also considering a BRRRR on a small distressed multifamily, the BRRRR deal analyzer layers in the rehab budget and refinance math on top of the base underwriting model.

The math doesn't lie. It just requires you to ask every question before you commit.