Apartment Underwriting Guides: Income, Expenses, Value, Debt and Returns

On this page

1. Start here
2. Income
3. Expenses
4. Value and cap rates
5. Value-add plans
6. Debt
7. Returns and the model
8. How DoorRaise fits in
9. FAQ

Underwriting an apartment building means turning the seller's numbers into your own: income you can collect, expenses you will pay, a value the market supports, a loan a lender will make, and returns that still work if things go worse than planned. This page links every DoorRaise underwriting guide in the order you build a model, each with worked numbers.

Start here

• Multifamily Underwriting Basics: NOI, Cap Rate and DSCR: Underwriting tests whether an apartment deal works. Learn NOI, cap rate, DSCR and break-even occupancy with a worked example and a stress test.
• How to Underwrite a 20-Unit Apartment Building: Underwrite a 20-unit apartment building in seven steps: rents, vacancy, expenses, NOI, price, debt and a downside case, with a hypothetical worked example.
• How to Read a Rent Roll and T-12 Before You Buy or Invest in an Apartment Deal: What a rent roll and a T-12 show, how to tie them together, the red flags that inflate NOI, and a worked example of an apartment deal's income and expenses.
• T3 Annualized vs T12: Which Income Should You Underwrite an Apartment On?: A T3 annualizes the last 3 months of income; a T12 uses the last 12. When a T3 is fair, why its expenses mislead, and what the gap does to price. Worked numbers.
• Apartment Lease Audit: How to Verify the Rent Roll Before Closing: How to run a lease audit on an apartment building: compare leases, rent roll and bank deposits, find concessions and mismatches, and adjust your price.

Income

• Net Operating Income (NOI) for Apartments: Formula and Example: NOI is effective gross income minus operating expenses. See the formula, what to include and exclude, a hypothetical example and how sellers inflate it.
• How to Pull Rent Comps for an Apartment Deal: How to find rent comps for an apartment building, match unit type and condition, adjust for differences and show investors the math, with a worked example.
• Loss to Lease in Apartments: Formula and Example: Loss to lease is the gap between market rent and what tenants pay. See the formula, a hypothetical example and how to underwrite it without overpaying.
• Net Effective Rent and Concessions: How to Underwrite Free Rent in an Apartment Deal: How to calculate net effective rent, where concessions hide in a rent roll and T12, and how to underwrite free rent when you buy an apartment building.
• Other Income in Apartment Underwriting: What to Count: Other income is non-rent revenue such as laundry, parking, pet fees and late fees. See what to count, what to strip out and a hypothetical example.
• What Is RUBS, and How Does It Change an Apartment Deal's NOI?: How ratio utility billing (RUBS) splits an apartment building's utility bills among residents, what state law requires, and how it changes NOI and value.
• Vacancy and Credit Loss in Apartment Underwriting: How to Pick the Number: Vacancy and credit loss is the rent a building will not collect. Its four parts, where to find each in the T12, what lenders apply and what 1 point is worth.
• Economic vs. Physical Occupancy in Apartments: Physical occupancy counts filled units. Economic occupancy counts rent collected. See how loss to lease, concessions and bad debt widen the gap between them.
• What Is Stabilized Occupancy in an Apartment Deal?: What stabilized occupancy means for apartment sponsors and investors: typical definitions, why lenders and sponsors rely on it, and how to underwrite it.
• Rent Growth Assumptions in a Syndication Pro Forma: How to Test Them: How a passive investor can test the rent growth assumption in a syndication pro forma: market rent data, the in-place rent gap, concessions and a downside case.
• Rent-to-Income Ratio: Can Your Tenants Afford the Rent in Your Pro Forma?: Before you underwrite a rent increase, check it against renters' incomes. How to run the rent-to-income test with free Census data, with a worked example.
• Unit Mix Analysis for Apartment Underwriting: A unit mix analysis lists each unit type with count, size and rent. See how to read rent per square foot, test demand and find renovation priorities.

Expenses

• Apartment Operating Expense Ratio: How to Calculate It: Operating expense ratio is operating expenses divided by effective gross income. See the formula, what counts, a hypothetical example and how to test it.
• How to Build a First-Year Operating Budget for an Apartment Building You Just Bought: How to build the year-one operating budget for an apartment syndication: income by month, each expense line, capital items kept separate, and reporting against it.
• Expense Growth Assumptions in an Apartment Pro Forma: How to Set Them: Rent growth gets the attention, but expense growth moves value just as much. How to set it line by line, with a worked example of a 2% vs 5% assumption.
• Apartment Insurance Costs in Underwriting: How to underwrite apartment building insurance: what drives premiums, what lenders require, why to get a quote first, plus an example.
• Will Property Taxes Go Up After You Buy an Apartment Building?: Why an apartment building's property tax often rises after a sale, how California, Florida, Texas and Georgia handle it, and how to underwrite it.
• Apartment Turnover Costs in Underwriting: Turnover cost is lost rent, make-ready and leasing cost each time a tenant moves out. See how to estimate it per unit and what a higher turnover rate does.
• Property Tax Abatements and PILOT Agreements in Apartment Syndication: How They Change Underwriting: How PILOT agreements and property tax abatements work for apartments, how to model taxes with and without them, the burn-off, exit pricing and disclosure.

Value and cap rates

• How to Calculate the Cap Rate on an Apartment Building: The cap rate formula is NOI divided by price. See the five versions sellers, lenders and buyers use, with one worked example and the adjustments that matter.
• What Is a Good Cap Rate for an Apartment Building?: There is no single good cap rate for apartments. Learn what drives it, how to compare a deal's cap rate to the market and the traps that make one misleading.
• Cap Rate Compression and Expansion: How a Moving Cap Rate Changes an Apartment's Value: Cap rate compression raises values; expansion lowers them, even when income grows. Worked math on one building shows how much the sale depends on the exit cap rate.
• What Exit Cap Rate Should a Syndication Assume?: The exit cap rate sets a syndication's projected sale price. Why cautious models assume it at or above the going-in rate, and how to stress test it.
• Multifamily Cap Rates vs. the 10-Year Treasury: Why multifamily cap rates are compared with the 10-year Treasury, its history from FRED, a worked example of a rate move and why the spread is no forecast.
• Price Per Unit for Apartments: What It Does and Does Not Tell You: Price per unit is purchase price divided by number of units. See the formula, why it can mislead without NOI, and a hypothetical example of two buildings.
• Gross Rent Multiplier for Apartment Buildings: How to Use It (and When It Lies): How to calculate gross rent multiplier for an apartment building, when GRM is a useful first screen, and why two buildings with the same GRM can differ in value.
• How to Pull Apartment Sales Comps to Check Your Exit Value: How to find and use apartment sales comps for underwriting: where to get sale data, which sales to compare, how to adjust and how to test your exit price.
• DCF vs Direct Capitalization: Two Ways to Value an Apartment Building: Direct capitalization values a building on one year of NOI; a discounted cash flow values every year plus the sale. How each works, a worked example and when they disagree.
• Replacement Cost vs Purchase Price: Is the Apartment Building a Bargain?: Buying below replacement cost means a new building would cost more than yours. How to estimate it per unit, adjust for age, and when the claim misleads.
• Yield on Cost vs. Cap Rate for Apartment Deals: Cap rate uses today's NOI and price. Yield on cost uses stabilized NOI and total project cost. See both formulas and a hypothetical example.
• Mixed-Use Building Syndication: How to Buy and Raise for Apartments With Retail Units: How lenders, appraisers and investors treat the shops under a mixed-use apartment building, and how to underwrite and describe the commercial units.
• Condo Conversion as an Exit for an Apartment Syndication: When the Math Works and What Can Go Wrong: A condo conversion sells an apartment building one unit at a time. How it works, when the math beats a bulk sale, risks and what investors must be told.

Value-add plans

• Value-Add Apartments: How the Business Plan Works: A value-add apartment plan buys a building with fixable problems, improves it and aims to raise income. See the levers, the budget, the timeline and the risks.
• Value-Add Renovation Budget Per Unit: How to Build It: How to build a value-add renovation budget per unit: scope, bids, contingency, rent premium, return on cost and a hypothetical downside case.
• Renovation Pace and Lease-Up in Value-Add Underwriting: Modeling the Dip: Renovated units sit empty before they earn more. How to model units per month, downtime and the year-1 income dip, with a worked example at two renovation paces.
• How to Calculate Break-Even Occupancy for an Apartment Deal: How to calculate break-even occupancy for an apartment deal: the formula, a worked example, a stress test table and why lenders and investors check it.
• Workforce Housing and NOAH Apartment Syndication: How Sponsors Underwrite and Describe It: What workforce housing and NOAH mean, how sponsors underwrite older Class B and C apartments, the main risks, and how to describe the deal honestly.

Debt

• How Lenders Size an Apartment Loan: LTV, DSCR and Debt Yield Together: Lenders run three tests, loan-to-value, DSCR and debt yield, and lend the lowest result. A worked example shows which one binds and what to do about it.
• Multifamily DSCR Loans: Requirements and Loan Sizing: What a multifamily DSCR loan is, how lenders size it from the property's income, published terms for 5+ units and a worked maximum-loan example.
• Debt Yield for Apartment Loans: Formula and Example: What debt yield is, the formula (NOI divided by loan amount), a worked apartment example, how it differs from DSCR, LTV and cap rate, and why lenders use it.
• What Is a Loan Constant? The Mortgage Constant Table for Apartment Loans: The loan constant is the yearly loan payment per dollar borrowed. The formula, a table by rate and amortization, and how it ties to DSCR, leverage and loan size.
• Loan-to-Cost vs Loan-to-Value on an Apartment Deal: LTC vs LTV on a multifamily loan: the formulas, which lenders use which, a worked value-add example showing the lesser-of rule, and how it sets your equity raise.
• Apartment Loan Types Compared: Agency, HUD, CMBS, Bank, Life Company and Bridge: Six kinds of lenders finance apartment buildings. Compare recourse, term, rate type, prepayment and flexibility in one table, and which fits which business plan.
• Fixed vs Floating Rate Apartment Loans: How to Choose for Your Business Plan: A fixed rate loan locks the payment but can be costly to repay early. A floating rate loan is cheap to exit but moves with rates. How to pick, with worked numbers.
• Interest-Only Periods on Apartment Loans: How They Work and What They Cost: An interest-only period lowers the loan payment for a few years, then it rises. See the payment jump, the DSCR effect and the loan balance at sale, worked out.
• How Apartment Loan Rates Are Priced: Index Plus Spread, Explained: An apartment loan rate is an index (a Treasury yield or SOFR) plus a lender spread. What moves each part, what a quarter point costs, and how to compare quotes.
• Apartment Loan Closing Costs: Every Lender Fee and Deposit to Budget: Origination, lender legal, third-party reports, rate lock deposits, escrows, rate caps: the costs of an apartment loan, when each is paid and what is refundable.
• Negative Leverage in Apartment Deals: When Debt Lowers Your Return: Negative leverage means the loan costs more than the building yields, so debt lowers cash flow. How to spot it with the loan constant, with worked numbers.
• Refinance Risk in Apartment Syndications: What Happens When the Loan Matures: When an apartment loan matures, the new loan is sized on today's income, rates and cap rates. A worked example of a $964,000 refinance gap and how deals close it.
• The Appraisal Came In Low on Your Apartment Purchase: What Sponsors Can Do: A low appraisal shrinks the loan and opens an equity gap. See the math, the options from a price cut to walking away, and how to tell investors.
• Can You Use an SBA Loan to Buy an Apartment Building? What Sponsors Use Instead: Generally no: SBA 7(a) and 504 loans exclude rental real estate. See the occupancy rules, the mixed-use gray area and the loans sponsors use instead.
• Master Lease Option on an Apartment Building: How It Works for a Sponsor: A master lease option lets you lease and run a whole apartment building with the right to buy it later at a set price. How it works, key terms, risks.
• Proof of Funds for an Apartment Offer When You Plan to Syndicate: What to Send the Broker: A broker wants proof of funds but you raise from investors later. What sellers really check, the honest options, and what never to send.

Returns and the model

• Equity Multiple vs. IRR vs. Cash-on-Cash Return: How to Read a Syndication's Numbers: Equity multiple, IRR and cash-on-cash explained with worked math, a pitch-vs-downside example, and the rules on projected returns as of October 2026.
• How to Calculate Cash-on-Cash Return on an Apartment Deal (and Why Numbers Differ): Cash-on-cash return is yearly cash flow divided by the cash invested. The same deal can show 3.8% or 5.1% depending on what goes in each line. A worked example.
• Levered vs Unlevered IRR in Apartment Deals: What Each One Tells You: Unlevered IRR measures the building. Levered IRR measures the equity after the loan. A worked 5 year example shows when debt helps, when it hurts and why.
• Cap Rate vs IRR: What Each Number Measures in an Apartment Deal: A cap rate is one year of income over price, all cash. An IRR is the yearly return over the whole hold, including the sale. How they relate, with worked numbers.
• Average Annual Return vs IRR: Why the Same Syndication Can Show Both: An average annual return ignores when money comes back; IRR does not. Three deals with the same 16% average annual return have IRRs from 12.5% to 16%.
• How the Hold Period Changes IRR and Equity Multiple in an Apartment Deal: A longer hold raises the equity multiple but often leaves the IRR flat. Worked numbers for 2, 3, 5, 7 and 10 year holds, and what each means for investors.
• Sensitivity Analysis for Apartment Deals: A Worked Example: Sensitivity analysis changes one or two assumptions at a time to see what breaks. See a hypothetical vacancy and expense table and what to test first.
• Sources and Uses: How Much Equity to Raise: A sources and uses table shows every dollar a deal needs and where it comes from. Learn to build one step by step and set your equity raise from the result.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units from their friends and followers, and runs the investor side after closing: quarterly distributions from the deal's bank account, investor updates and K-1 delivery. The deal's accountant prepares the K-1s; DoorRaise delivers them. DoorRaise also forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals. Investors fund by wire into escrow at Enterprise Bank & Trust. DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.

Check your numbers with the free cap rate and DSCR calculator, then start your deal.

FAQ

Where should I start underwriting an apartment deal?

With the rent roll and the trailing 12 month statement, checked against bank deposits and leases. The start-here guides walk through it.

What numbers matter most?

Net operating income, the cap rate on income you can prove, the loan the lender will size, and the returns at a higher exit cap rate and slower growth.

This article is general information, not legal, tax or investment advice. Each linked guide states the date its rules and figures are as of. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.