Multifamily Payback Calculator

What it computes, and the formulas

The calculator builds a year's revenue from the multifamily lines below, takes off the operating expenses, and sets the net operating income against the loan: the coverage a lender reads, the cash left after the payments, and the years the project and the equity take to pay back. A break-even line shows how far revenue can fall before the cash flow after debt service reaches zero.

• Revenue: the sum of the lines. Rental income = units × monthly rent × 12 × economic occupancy; Other income = as entered.
• Operating expenses: E = revenue × the share that rises with revenue + fixed expenses.
• Net operating income: NOI = revenue − E.
• Monthly payment on a loan L: P = L × r ÷ (1 − (1 + r)⁻ⁿ), with r = annual interest rate ÷ 12 and n = amortization in years × 12 (at a zero rate, P = L ÷ n). Annual debt service: D = 12 × P.
• Debt service coverage: NOI ÷ D. Cash flow after debt service: CF = NOI − D.
• Equity: total project cost − L.
• Simple payback on the project cost: total project cost ÷ NOI, in years.
• Payback on the equity: equity ÷ CF, in years. Cash-on-cash return: CF ÷ equity.
• Break-even revenue: (fixed expenses + D) ÷ (1 − the share that rises with revenue). Revenue cushion: 1 − break-even revenue ÷ revenue.

A payback that never arrives, because the net operating income or the cash flow after debt service is not positive, reads "never at these inputs". For coverage and the largest loan the cash flow carries, use the DSCR and Loan Sizing Calculator.

Entering a multifamily project

A management fee is charged as a share of collected income and belongs in the variable share; property taxes, insurance, repairs, payroll, common utilities and a replacement reserve are fixed. Payback understates a stabilized building's return, because it counts neither the principal the rents repay nor any rise in the building's value.

SBA lends little in this class: SBA treats most lessor businesses as passive and ineligible, and its lending to residential lessors almost stops from FY2024, so the record below is small and mostly older loans. An apartment project is more often financed with a conventional, agency or HUD-insured loan; enter that lender's rate and term.

What it does not do

• An estimate, not a feasibility study: it takes your revenue and costs as given and tests none of them against a market, a trade area or the competition.
• Not an appraisal: it states no value for the property or the business.
• Not lending advice: a lender sizes a loan on its own credit policy, its program's rules and its own reading of the cash flow.
• One stabilized year, undiscounted: no ramp-up, no growth in prices or costs, no inflation, no income tax, no depreciation, no sale and no change in value. Payback counts years of that steady cash flow, and a later dollar counts the same as a dollar today.
• One loan, fully amortizing in equal monthly payments at a fixed rate: no interest-only period, balloon, fees or second lien. An SBA 504 project carries two liens, and its coverage is tested on both payments together.

The method behind these tests is set out in the methodology series: Sensitivity and Stress Testing: Break-Even Points, Shock Sizes and What a Lender Should See.