- Example NOI
- $106,000
- Example cap rate
- 4.42%
- Example cash flow
- $-21,703
Annual, before debt and income tax
NOI divided by purchase price
Annual after example debt service, before capital expenses and tax
A San Francisco apartment building can look inexpensive on a price-per-unit basis and still cost money every month. The first calculation I want is net operating income from the actual rent roll, followed by the mortgage payment and a separate reserve for capital work. If those numbers do not hold together, hoped-for appreciation is not a substitute.
Multifamily cap rate and cash-flow calculator
Change the hypothetical inputs to estimate NOI, going-in cap rate, and after-debt annual cash flow. The default figures are not a property listing or a live lender quote.
- Annual net operating income
- $106,000
- Capitalization rate
- 4.42%
- Annual cash flow after debt
- -$21,703
Before capital replacements and income tax
| Line | Amount |
|---|---|
| Scheduled rent | $180,000 |
| Vacancy and collection allowance | $9,000 |
| Effective income | $171,000 |
| Annual operating expenses | $65,000 |
| Net operating income | $106,000 |
| Annual debt service | $127,703 |
| Cash flow after debt | -$21,703 |
Downside scenarios
| Scenario | NOI | Cash flow after debt |
|---|---|---|
| Your assumptions | $106,000 | -$21,703 |
| Vacancy increases by 5 percentage points | $97,000 | -$30,703 |
| Expenses increase by $20,000 | $86,000 | -$41,703 |
Cap rate = NOI ÷ purchase price. Loan payment assumes a fixed rate and 360 monthly payments. The model omits acquisition costs, taxes on income, capital replacements, financing fees, reserve requirements and appreciation. Confirm actual expenses and lawful rents against property records.
An auditable four-unit example
Consider a hypothetical four-unit building priced at $2.4 million that collects $15,000 per month in gross rent. Assume 5% vacancy and collection loss, $65,000 in annual operating expenses, a $1.56 million loan, a 7.25% annual fixed interest rate and 30-year amortization. The 7.25% is an illustration, not a lender quote.
| Line | Input or formula | Annual result |
|---|---|---|
| Purchase price | Illustrative acquisition cost | $2,400,000 |
| Scheduled rent | $15,000 × 12 | $180,000 |
| Vacancy and collection loss | 5% × scheduled rent | $9,000 |
| Effective income | Gross rent less vacancy | $171,000 |
| Operating expenses | Insurance, repairs, utilities, taxes, management and administration | $65,000 |
| Net operating income | Effective income less expenses | $106,000 |
| Cap rate | NOI ÷ $2.4 million | 4.42% |
| Loan balance | 65% loan-to-value | $1,560,000 |
| Debt service | Monthly amortized payment × 12 | $127,703 |
| Cash flow after debt | NOI less debt service | $-21,703 |
The example excludes acquisition and financing closing costs, capital replacements, leasing costs outside the expense budget, tax effects and any restricted or unpaid rent. Actual underwriting must use the property records.
Change the assumptions before changing the price
| Case | Annual NOI | Cap rate | Cash flow after debt |
|---|---|---|---|
| Base case | $106,000 | 4.42% | $-21,703 |
| Vacancy 10% | $97,000 | 4.04% | $-30,703 |
| Operating costs +$20,000 | $86,000 | 3.58% | $-41,703 |
| Rent 10% lower | $88,900 | 3.70% | $-38,803 |
Each downside changes one input relative to the base. The financing terms remain fixed. These are separate stress tests, not probabilities or forecasts.
The lesson is not that every San Francisco building has a low cap rate. It is that the same property can move from a manageable carrying cost to a painful one with a relatively small change in collections or operating costs. Run the same calculations with the signed leases, ledgers and property tax reassessment before deciding what to offer.
What belongs in the operating budget?
- Verify annual lawful rent collected, concessions, bad debt and vacancy by unit, not just listing rents.
- Estimate reassessed property taxes, insurance, water, sewer, garbage, owner-paid utilities, maintenance, management and compliance costs.
- Separate recurring repairs from roof, seismic, major systems and other capital projects, then reserve cash for those projects.
- Get property-specific quotes for loan rate, term, amortization, debt-service coverage, insurance and closing costs.
- Use a downside case with delayed leasing, a major repair and higher debt cost.
For a deeper acquisition workflow, see how we evaluate San Francisco investment properties, residential versus commercial financing, and living in one apartment while renting the others.
Common questions
Does NOI include my mortgage?
No. NOI is calculated before debt service. Subtract mortgage payments afterward to estimate pre-tax cash flow.
Should capital replacements be part of the cap rate?
Recurring operating expenses belong in NOI; major capital spending and reserves should be modeled separately and deducted when assessing actual cash needs. Be consistent when comparing properties.
Can I use advertised rent for occupied units?
Use the actual lawful lease rent and payment history for your base case. Treat possible new rental income as a separate case subject to applicable tenancy rules.
Methodology
All dollar figures and the 7.25% interest rate are hypothetical. Payment uses a fixed monthly amortization formula: balance × monthly rate ÷ [1 − (1 + monthly rate)^−360]. Round displayed values to the nearest dollar; cap rates to two decimals. The model does not estimate a verified market cap rate or promise returns.