Multifamily Financial Metrics

Understanding Financial Metrics for Multifamily Real Estate Investing

When it comes to multifamily real estate investing, the ability to analyze deals quickly and accurately is the difference between passing up life-changing opportunities and creating lifelong cash flow. At Multifamily Wealth Nation, we believe that mastering underwriting is one of the most powerful skills you can develop as an investor — and it doesn’t have to be overwhelming.

Why Underwriting Matters

If you’ve ever spent hours buried in spreadsheets trying to analyze a deal, you’re not alone. Many new investors get stuck here, often taking an hour or more just to underwrite a single property. The truth is, it can be done faster without losing accuracy — but only if you have the right system.

Think about it: if your goal is to build financial freedom through multifamily investing, you need to be analyzing at least 3 deals a week. Consistent deal flow is what allows you to find the hidden gems — whether it’s a duplex in an emerging market or a 200-unit building in a booming metro.

But how do you know which deals are worth your time? That’s where understanding the key financial metrics comes in.

The Core Metrics Every Multifamily Investor Must Know

When underwriting a property, you’re essentially creating a picture of its financial health. Here are the metrics that matter most:

1. Gross Scheduled Income (GSI)

This is the maximum rent the property could collect if every unit were occupied at full market rent, with zero vacancies. It’s the starting point for estimating potential income.

2. Gross Effective Income (GEI)

Reality is different from the perfect scenario. GEI subtracts losses like vacancy, concessions (free rent or perks to attract tenants), and bad debt. It also adds any “other income” such as laundry, parking, or vending machines. GEI shows what the property actually collects.

3. Net Operating Income (NOI)

This is the golden metric: Income – Expenses = NOI.
Your NOI determines how much money is left after operating costs and is the foundation for valuing a property. As a multifamily owner, your mission is to increase NOI every year — either by raising income or cutting unnecessary expenses.

4. Debt Service Coverage Ratio (DSCR)

DSCR = NOI ÷ Debt Service.
This tells lenders (and you) whether the property generates enough income to cover its mortgage. A DSCR of 1.25 or higher is usually required by banks, meaning you’re earning $1.25 for every $1 owed on the loan. The higher the DSCR, the safer the deal.

5. Capitalization Rate (Cap Rate)

Cap Rate = NOI ÷ Property Value.
This metric gives a quick snapshot of potential return compared to market norms. But remember, cap rate is just one tool — don’t rely on it alone.

Example: Underwriting in Action

Imagine a 10-unit property where:

• GSI = $120,000/year

• Vacancy = 5% ($5,000)

• Concessions = $10,000

• Operating Expenses = $40,000

Here’s how it plays out:

• GEI = $120,000 – $5,000 – $10,000 = $105,000

• NOI = $105,000 – $40,000 = $65,000

• DSCR = $65,000 ÷ $45,000 = 1.44 (strong coverage)

• Cap Rate = $65,000 ÷ $1,000,000 = 6.5%

Result? A financially sound deal with good cash flow potential.

The Bigger Picture: Beyond the Numbers

Numbers tell half the story. The other half comes down to the sticks, bricks, and location: the building’s condition, the neighborhood, and the market dynamics. A property with strong financials in a declining market may not serve you as well as a solid, stable property in a high-growth area.

That’s why Multifamily Wealth Nation teaches not just underwriting — but also how to build systems, analyze markets, and position yourself for long-term wealth.

The Path to Lifelong Cash Flow

Mastering these underwriting metrics isn’t just about buying apartments — it’s about building freedom. When you understand how to quickly analyze deals, you stop guessing and start investing with confidence. That’s how you create:

• Monthly cash flow that covers your lifestyle

• Equity growth that compounds year after year

• Generational wealth that lasts beyond you

This is the power of multifamily real estate investing, and it’s what drives the mission of Multifamily Wealth Nation.

If you’re serious about creating lifelong wealth through multifamily investing, you need to master the fundamentals of underwriting. Start with these metrics, practice analyzing at least three deals a week, and build the muscle memory that will allow you to spot great opportunities faster than the competition.

Remember: real estate isn’t just about buildings — it’s about building freedom. And at Multifamily Wealth Nation, we’re here to help you every step of the way.