The 5 Most Crucial Investment KPIs for Multifamily Properties



Investing in multifamily properties can be extremely profitable when it is done correctly. However, in order to make ideal real estate investments, real estate investors need to be aware of certain KPIs for multifamily properties. Only by carefully analyzing these KPIs can you properly assess potential real estate investments to identify the best ones.

In this blog, we will be discussing the top 5 most crucial investment KPIs for multifamily properties. After reading the blog, you will have a much better understanding of what to look for in multifamily properties. Let’s get started!


• Net Operating Income (NOI)


Net operating income tells you exactly how much money a property is generating per year after subtracting the expenses. The formula for NOI is annual income – annual expenses. NOI appears on a property’s income and cash flow statement. It is a pre-tax figure. This figure is extremely important because it lets you know how much money a property is actually making. Some properties have large incomes but they also have large expenses. The goal is to look for properties with large NOIs, not just large incomes because if expenses are too high, it can cut into your profits.

• Debt Coverage Ratio (DCR)


Debt coverage ratio is a measure of a property’s income compared to its debt. Debt coverage ratio is also referred to as debt service coverage ratio. The formula for DCR is NOI/Annual Debt obligations. So, for example, let’s say a multifamily property had a NOI of $1,000,000 and had annual debt obligations of $500,000. To calculate DCR for this property you would divide $1,000,000 by $500,000. This would give you a DCR of 2. DCRs over 1 are considered to be good and DCRs below 1 are considered to not be good. Oftentimes, lenders will even require DCRs to be at least 1.15-1.25 in order to approve mortgage loans. So, when you are evaluating properties, the high