Multi-Family Calculator — Apartment Building Cap Rate & Per-Unit ROI
Four units or forty, multi-family math is the same as single-family — just summed across doors. This guide models per-unit rents, economies of scale, and DSCR for larger loans.
A multi-family calculator values apartment buildings the same way as a single rental, then scales across units. The appeal: more doors mean smoother cash flow (one vacancy doesn't sink the month) and economies of scale on management. This guide models a 4-unit building end to end.
Why Investors Love Multi-Family
- Smoothed vacancy: a 4-plex at 95% occupancy still earns 3.8 "doors" of rent.
- Scale: one roof, one loan, one insurance policy.
- Financing: commercial loans underwrite on the asset's NOI, not just your W-2.
- Exit: buyers price multi-family on cap rate, so improving NOI directly lifts value.
Building the Pro Forma
Start with scheduled rent across units:
| Unit | Monthly Rent |
|---|---|
| A | $1,100 |
| B | $1,100 |
| C | $1,200 |
| D | $1,200 |
| Total | $4,600 |
Apply 7% vacancy → effective income $4,278/month ($51,336/yr). Subtract operating expenses: taxes $580, insurance $320, maintenance $400, management 8% ($368) = ~$1,668/month. NOI ≈ $2,610/month or $31,320/year.
Cap Rate on the Building
At a $620,000 purchase price:
Cap Rate = $31,320 ÷ $620,000 = 5.05%
Commercial multi-family cap rates run 4.5–7% depending on class and market. A value-add play buys at 6% and exits at 5% after raising NOI — that alone creates equity.
Per-Unit Economics
Divide NOI by doors for a quick health check: $31,320 ÷ 4 = $7,830 NOI/unit/year. Compare to market per-unit rents to spot underperformers (Unit A/B at $1,100 may be below market — a raise boosts value).
DSCR — The Commercial Loan Gate
Lenders require a Debt Service Coverage Ratio ≥ 1.25: NOI must exceed debt service by 25%. On our NOI of $31,320, max annual debt service ≈ $25,056 ($2,088/month). That caps your loan size. DSCR is why strong NOI is the key to leverage.
Value-Add Math
Raise every unit by $100 (total +$400/mo = +$4,800/yr NOI). At a 6% cap, value rises $4,800 ÷ 0.06 = $80,000 — far more than the rent-increase cost. This is the multi-family wealth engine.
Small (2–4) vs. Large (5+) Units
| Factor | 2–4 units | 5+ units |
|---|---|---|
| Loan type | Residential / conforming | Commercial |
| Underwriting | Your income | Asset NOI |
| Management | Often self | Pro recommended |
| Cap rate | Slightly higher | Lower (institutionally held) |
Reading a Rent Roll and the T-12
Before you trust a seller's pro forma, demand two documents: the rent roll and the trailing-twelve-month statement (T-12). The rent roll lists every unit, its current tenant, lease start and end dates, actual rent, and any concessions. The T-12 is the last twelve months of real income and expenses. The gap between "market rent" on a broker's flyer and "actual rent" on the rent roll is where deals are won or lost.
Watch three things. First, loss to lease — the difference between market and in-place rent, which is your upside but also a sign the seller under-managed. Second, economic vacancy, which adds concessions, non-payment, and model units to physical vacancy; it is almost always higher than the "95% occupied" headline. Third, expense normalization: a seller may show artificially low management (self-managed) or maintenance (deferred). Re-underwrite with market-rate management (7–10%) and a realistic per-unit reserve.
Operating-Expense Ratios by Building Size
The 50% rule loosens as buildings scale, because fixed costs spread across more doors — but new line items appear (on-site staff, common-area utilities, elevators). Typical operating-expense ratios (OpEx ÷ effective gross income):
| Building | Typical OpEx ratio |
|---|---|
| Duplex / triplex | 35–45% |
| 4–10 units | 40–50% |
| 10–50 units (with staff) | 45–55% |
A ratio far below these for the class and age of building is a red flag that the seller deferred maintenance or omitted reserves — model it back in before you make an offer.
Common Multi-Family Underwriting Mistakes
- Trusting pro-forma rents. Underwrite in-place rent first; treat the raise to market as a separate value-add scenario, not a given.
- Skimping on reserves. Roofs, boilers, and parking lots are five-figure repairs. Budget a real per-unit capital reserve, not a token line.
- Ignoring the loan reset. Most commercial loans balloon in 5–10 years. If you can't refinance or sell before the balloon, DSCR at reset — not at purchase — is the number that matters.
- Forgetting the exit cap. Buyers price on cap rate, so assume you sell at a slightly higher cap than you bought (cap-rate expansion) to stay conservative.
Using the Calculator Below
Enter price, down payment, loan, and each unit's rent. The tool sums NOI, cap rate, cash-on-cash, and DSCR. Add or remove units to model 2–20 doors.
Disclaimer: Commercial underwriting varies by lender. Estimates only; consult a commercial broker and CPA.
Contact & corrections
RentalInvestCalc is an independent editorial project. Spot a data error or want a source added? Email 18999737@qq.com or read our About page. We publish estimates and guides, not tax, legal, or financial advice — always confirm figures with the county assessor and a licensed CPA or attorney.