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Multifamily DSCR Calculator: Loan Coverage, Break-Even Occupancy and the Cushion Above Your Lender's Minimum
A multifamily DSCR calculator is a tool that divides an apartment building's net operating income by its loan payment, and shows how far the result is from break-even and from the lender's minimum.
It opens on Birch Way, our 50-unit sample building, the same building as the home page calculator. Birch Way is invented data. Change any number and every result moves with it.
Taxes, insurance, repairs, utilities and management, divided by the number of units.
The building's loan payment divided by the number of units. Enter 0 if there is no loan.
1.25 is only an example. Type the minimum written in your loan documents. The lender's own calculation, as those documents define it, is the one that counts.
Loan coverage
1.23
1.00 to 1.24
Left after the loan
$7,650
per month
The building covers its loan, with little room.
- Break-even
- 84%
- Running costs and the loan payment are covered once 84% of units are rented. You are at 94%.
- Cushion to your minimum
- -0.02
- 0.02 short of your minimum of 1.25 (example). To reach it, the building needs $725 more net operating income a month, or 95% rented.
| Line | Per month |
|---|---|
| Rent if every unit is full | $72,500 |
| Rent collected at 94% rented | $68,150 |
| Running costs | -$27,000 |
| Net operating income (left before the loan) | $41,150 |
| Loan payment, principal and interest | -$33,500 |
| Left after the loan | $7,650 |
| Loan coverage | 1.23 |
| Break-even, percent of units rented | 84% |
| Cushion to your minimum | -0.02 |
| Net operating income the minimum needs | $41,875 |
| Percent rented that reaches the minimum | 95% |
The calculator starts with Birch Way, invented data. It is a rough reading, not a full set of books. Coverage is shown to 2 decimals and break-even is rounded up, as on the home page.
How does the multifamily DSCR calculator work?
It works out net operating income from your units, rent, percent rented and running costs, then divides it by the loan payment. The result is the building's coverage, to 2 decimals.
- Rent if full is units times rent per unit. Rent collected is rent if full times the percent rented.
- Net operating income is rent collected minus units times running costs per unit.
- Coverage is net operating income divided by the loan payment, to 2 decimals.
- Break-even is running costs plus the loan payment, divided by rent if full, rounded up to a whole percent.
- Cushion is coverage minus the minimum. The percent rented that reaches the minimum is running costs plus the loan payment times the minimum, divided by rent if full, rounded up.
Net operating income is what the building has left before the loan: rent collected less running costs. What the ratio means, and what counts in it, is in debt service coverage ratio for an apartment building.
What do you enter in the multifamily DSCR calculator?
6 numbers: units, average rent per unit, percent of units rented, running costs per unit, loan payment per unit, and the minimum coverage written in your loan documents.
The 6 inputs and the Birch Way defaults, invented data
| Input | Default | Where to find it |
|---|---|---|
| Units | 50 | The rent roll: the count of units. |
| Average monthly rent per unit | $1,450 | The rent roll: rent if full divided by the number of units. |
| Units rented | 94% | The rent roll: rented units divided by all units. |
| Monthly running costs per unit | $540 | The monthly P&L: running costs divided by the number of units. |
| Monthly loan payment per unit | $670 | The lender statement: principal and interest divided by the number of units. Escrow is left out. |
| Lender's minimum coverage | 1.25, an example | Your loan documents, in the covenant section. The default is only an example. |
To build the top number line by line, use the apartment NOI calculator. Which part of the lender draft is the loan payment is in recording a multifamily loan payment.
What does the DSCR result mean for an apartment building?
It is the dollars the building earns for each dollar of loan payment. 1.23 means $1.23 earned for every $1.00 due. Below 1.00, the building does not cover its loan.
The calculator names the band the result falls in. The 3 bands are this site's own, the same ones as the gauge on our home page. They are not a lender's rule.
| Band | What it means |
|---|---|
| Below 1.00 | The building earns less than its loan costs. Something else is paying part of the loan. |
| 1.00 to 1.24 | The building covers its loan, with little room. Birch Way at 1.23 sits here. |
| 1.25 and above | The building covers its loan with room to spare. |
What is break-even occupancy for an apartment building?
Break-even occupancy is the percent of units that must be rented to cover running costs and the loan payment. Birch Way: $60,500 divided by $72,500, rounded up, is 84%.
Birch Way: running costs of $27,000 plus a loan payment of $33,500 is $60,500. That is 83.4% of $72,500 rent if full. At 83% rented the building still falls short, so the figure rounds up to 84%. Birch Way is 94% rented, 10 points above its break-even.
To see what empty units cost in dollars, use the vacancy loss calculator.
How far is an apartment building from its lender's minimum DSCR?
Subtract the lender's minimum from the building's coverage. Birch Way at 1.23 against an example minimum of 1.25 is 0.02 short. It needs $725 more net operating income a month, or 95% rented.
The example minimum of 1.25 is the line where this site's gauge turns green. It is not a lender's rule. $33,500 times 1.25 is $41,875 of net operating income. Birch Way has $41,150, which is $725 short. Running costs of $27,000 plus $41,875 is $68,875, and that is 95.0% of $72,500. So 95% rented reaches the example minimum.
The lender's own calculation, as your loan documents define it, is the one that counts. Type your minimum into the calculator and the cushion, the extra net operating income and the percent rented all move to match it.
What happens to an apartment building's DSCR if rent drops or the loan payment rises?
Coverage falls. At 90% rented, Birch Way's coverage drops from 1.23 to 1.14. If the loan payment rises from $670 to $700 a unit, it drops to 1.18.
2 tests on Birch Way, invented data
| Rent collected | Net operating income | Loan payment | Loan coverage | |
|---|---|---|---|---|
| Today: 94% rented, $670 a unit | $68,150 | $41,150 | $33,500 | 1.23 |
| Test 1: 90% rented | $65,250 | $38,250 | $33,500 | 1.14 |
| Test 2: loan payment $700 a unit | $68,150 | $41,150 | $35,000 | 1.18 |
2 empty units out of 50 take the ratio from 1.23 to 1.14. A loan payment $30 a unit higher takes it to 1.18. Move the sliders above to run your own test and watch the cushion and break-even move with it.
Where do the calculator's numbers come from in an apartment building's books?
Rent and running costs come from the monthly P&L. Percent rented comes from the rent roll. The loan payment and the minimum come from the lender statement and the loan documents.
- Rent collected and running costs: the monthly P&L.
- Percent rented: the rent roll.
- Loan payment and the minimum: the lender statement and the loan documents.
Rent and running costs are lines of an apartment building profit and loss. Percent rented is read from a rent roll for an apartment building.
Multifamily Bookkeeping sends these numbers for every building, every month. See monthly bookkeeping for apartment buildings.