The Multi-Family Mortgage Calculator estimates the maximum mortgage a property can support based on its financial performance. It evaluates income streams (e.g., rents, laundry, pet fees), subtracts expenses (e.g., vacancies, operating costs), and calculates the Net Operating Income (NOI). Using the NOI and Debt Service Coverage Ratio (DSCR), it determines the maximum sustainable Principal and Interest (P&I) payments.
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Calculator to get the Max Mortgage for Multi-Family Properties
Use our Multi-Family Mortgage Calculator to find out the maximum possible mortgage, based on income and debt servicing. Follow our example below for the default settings of this calculator.
Guide to the Multi-Family Mortgage Calculator:
1. Annual Income
This section calculates the total potential income generated by the property.
User-Entered Fields:
- Number of 1-bedroom units: Enter the total number of 1-bedroom units in the property.
- Average rent 1-bedroom units: Enter the average monthly rent for 1-bedroom units.
- Number of 2-bedroom units: Enter the total number of 2-bedroom units in the property.
- Average rent 2-bedroom units: Enter the average monthly rent for 2-bedroom units.
- Number of 3-bedroom units: Enter the total number of 3-bedroom units in the property.
- Average rent 3-bedroom units: Enter the average monthly rent for 3-bedroom units.
- Laundry income: Enter any additional annual income generated from laundry facilities.
- Pet fees: Enter the total annual pet fees collected.
- Other income: Enter any other annual income sources, such as parking fees or vending machines.
Calculated Fields:
- Annual Rent Income (for each unit type): Multiplies the number of units by the average monthly rent and then by 12 to calculate annual rental income.
- Total number of units: Multiplies the total of all 1, 2 or 3 bedroom units.
- Total Potential Annual Income: Sums up all rental incomes and additional income sources to provide the total income before expenses.
2. Expenses
This section accounts for expected losses and expenses to determine the effective gross income (EGI).
User-Entered Fields:
- Vacancy factor: Enter the expected percentage of income lost due to vacancies (e.g., 5%).
- Management fees: Enter the expected percentage of management fees (e.g., 5%).
Calculated Fields:
- Vacancy losses: Multiplies the total potential annual income by the vacancy factor to calculate the expected loss.
- EGI (Effective Gross Income): Subtracts the vacancy losses from the total potential annual income.
- Management cost: Multiplies the management fees percentage by the Effective Gross Income (EGI).
3. Operating Expenses
This section calculates the total annual operating expenses.
User-Entered Fields:
- Property taxes: Enter the total annual property tax amount.
- Repairs and maintenance: Enter the annual cost for repairs and upkeep.
- Utilities: Enter the total annual utility costs paid by the property owner.
- Insurance: Enter the annual cost of property insurance.
- Legal/accounting: Enter the cost of legal and accounting expenses
- Other expenses: Enter any other recurring annual expenses.
- Labor: Enter any labor expenses.
Calculated Fields:
- Total Other Annual Expenses: Sums up all entered operating expenses to provide the total.
Final Sections
These sections summarize the property’s financial performance and include reserves and net operating income (NOI).
User-Entered Fields:
- Reserves per unit: Enter the annual reserve allocation per unit (e.g., for future repairs or capital expenditures), e.g., 250.00 per unit.
- DSCR Debt Service Coverage Ratio: Enter your chosen debt service coverage ratio. E.g., 1.25. The DSCR divides the NOI by the annual mortgage payment to determine the property’s ability to cover debt obligations.
- Interest rate: Enter the desired loan interest rate.
- Amortization period of loan (months): Enter the number of months for the loan to be amortized. E.g. 360 for 30 years or 180 for 15 years.
Calculated Fields:
- Annual Reserves: Multiplies the reserves per unit by the total number of units.
- Net Operating Income (NOI): Subtracts the total operating expenses and total reserves from the EGI to determine the NOI, which reflects the property’s profitability.
- Maximum P and I Mortgage Payment Annual: Divides the NOI by the DSCR to work out the maximum annual mortgage principal and interest payment.
- Maximum P and I Monthly Mortgage Payment: Divides the above Maximum P and I Mortgage Payment Annually by 12 to give a monthly amount.
What is the Maximum Possible Mortgage?
The Maximum Possible Mortgage: The final calculation on the calculates uses the inputs to calculate the maximum possible mortgage, based on the interest rate, amortization period and the Maximum P and I Mortgage Payment Annual.
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