Deal analysis
4 units · $700,000 · 3.5% down at 7%
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Deal analysis
4-unit · $700,000 · First-time buyer · 3.5% down at 7%
Financing qualification
Owner-occupant self-sufficiency (must be 1.00 or higher)
You live in one unit, so only the other 3 units count. 75% of their rent must cover the full PITIA payment (principal, interest, taxes, insurance, mortgage insurance and HOA).
Does not qualify at 3.5% down (ratio 0.78). To reach 1.00, put down 26.2% ($183,400), which lowers PITIA to $4,874/mo and needs about $158,900 more cash at closing. Alternatives: negotiate a lower price, buy down the rate, or verify higher rents.
How this purchase affects your monthly life
Lenders judge gross income. You live on take-home pay — so this is the test that matters to you.
Reserves: 6 months of your monthly budget = $29,232, on top of $45,500 for down payment and closing costs. Total savings needed: $74,732. You have $40,000 — short by $34,732.
Borrower: income, credit and payment
Monthly income $12,000 · other debts $500/mo · credit 700
- Credit score700 (≥ 580)
- Front-end DTI (PITIA ÷ income)52.2% (≤ 46.9%)
- Back-end DTI15.7% (≤ 56.9%)
- Reserves after closing$-5,500 (≥ 6 mo budget ($29,232))
Estimates for planning. Final approval depends on the lender, appraisal rent schedule and full underwriting.
Qualification viability
Qualification breakdown — FHA (owner-occupied)
Income — lenders use gross monthly income ($12,000). Owner-occupants also get credit for 75% of tenant rents ($5,625 at full occupancy).
Debt-to-income — (housing payment + other debts − rent credit) ÷ income. Yours: 15.7%; this program allows up to 56.9%.
Credit score — sets eligibility and pricing. Yours: 700; minimum 580. Every 20 points above ~680 typically improves rate or mortgage insurance.
Reserves — savings left after closing. 3 months of payments = $18,793, on top of $45,500 cash to close.
Loan limits — base loan $675,500 must fit the 4-unit limit ($1,008,300). Edit program rules on Scenarios.
Gaps to address
- Cash to close + reserves: Have $40,000, need $64,293 (3 mo. PITI reserves)→ Save another $24,293, negotiate seller credits, or use gift funds where allowed.
- FHA self-sufficiency: 75% of rents ÷ PITI = 0.90 (need ≥ 1.00)→ Need $853/mo more total rent, or a lower price/payment.
Passing: Credit score, Down payment, Debt-to-income, Loan limit.
Every ratio, explained
Open any term for its meaning, calculation, and how to read the result.
Net operating income (NOI)
Yearly property income after vacancy and operating expenses, before the mortgage.
Calculation: Effective income − operating expenses.
How to read it: Higher is better, but compare it with price and debt.
Capitalization rate (cap rate)
The property's unlevered annual yield, useful for comparing buildings without financing differences.
Calculation: NOI ÷ purchase price.
How to read it: Higher can mean a better yield, greater risk, or both.
Cash-on-cash return
The year-one cash profit earned by the actual cash you invest.
Calculation: Annual cash flow ÷ cash invested.
How to read it: A negative result means the deal consumes cash after debt service.
Internal rate of return (IRR)
The annualized return over the full hold, including cash flow, loan paydown, and sale proceeds.
Calculation: Rate that makes all dated cash flows equal today.
How to read it: It is very sensitive to appreciation and the assumed sale price.
Net present value (NPV)
Profit after translating future cash flows into today's dollars at your required return.
Calculation: Present value of future cash flows − initial cash.
How to read it: Above $0 means the projection clears your chosen discount rate.
Debt-service coverage ratio (DSCR)
How many times property income covers annual loan payments.
Calculation: NOI ÷ annual debt service.
How to read it: 1.00 means exact coverage; many lenders look for about 1.20–1.25 or more.
Equity multiple
Total cash returned over the hold for each dollar invested.
Calculation: Total cash returned ÷ cash invested.
How to read it: 2.0× means two dollars came back for every dollar invested; it ignores timing.
Year-one total return (ROI)
Year-one benefit from cash flow, principal paydown, and estimated appreciation.
Calculation: Year-one gains ÷ cash invested.
How to read it: Unlike cash-on-cash, this includes projected non-cash gains.
Gross rent multiplier (GRM)
A quick price-to-rent screen before expenses and financing.
Calculation: Purchase price ÷ annual gross rent.
How to read it: Lower is usually cheaper relative to rent, but it ignores costs and property condition.
1% rule
A rough screen comparing monthly gross rent with purchase price.
Calculation: Monthly gross rent ÷ purchase price.
How to read it: Near 1% may deserve a closer look; it is not a profitability test.
Break-even occupancy
The share of potential rent that must be collected to pay operating costs and debt.
Calculation: (Operating expenses + debt service) ÷ gross potential rent.
How to read it: Lower leaves more room for vacancy and missed rent.
Operating expense ratio (OER)
The portion of collected property income consumed by operating expenses.
Calculation: Operating expenses ÷ effective gross income.
How to read it: Lower is generally better; compare similar properties and accounting practices.
Debt yield
The lender's return on the loan before considering interest rate or amortization.
Calculation: NOI ÷ loan amount.
How to read it: Higher indicates a larger income cushion relative to debt.
Yield on cost
The property's unlevered yield on purchase price plus immediate repairs.
Calculation: NOI ÷ (price + rehab).
How to read it: Useful when comparing a renovated deal with its full project cost.
Price per unit
The acquisition price allocated across all apartments.
Calculation: Purchase price ÷ unit count.
How to read it: Use it to compare similar buildings in the same market.
Rent per unit
Average monthly market rent across the building's units.
Calculation: Monthly gross rent ÷ unit count.
How to read it: Check the average against unit-specific leases and nearby comps.
Front-end debt-to-income (DTI)
The proposed housing payment as a share of gross borrower income.
Calculation: Monthly housing payment ÷ gross monthly income.
How to read it: Lower leaves more income available for other obligations.
Back-end debt-to-income (DTI)
All monthly debts, including housing and allowed rent credit, compared with gross income.
Calculation: Net monthly debts ÷ gross monthly income.
How to read it: Lenders use this broader ratio for qualification limits.
Loan-to-value (LTV)
The share of the property's price financed by the base loan.
Calculation: Base loan ÷ purchase price.
How to read it: Lower means more equity and usually less lender risk.
PITI
The core monthly housing payment: principal, interest, property taxes, and insurance.
Calculation: Principal + interest + taxes + insurance.
How to read it: Mortgage insurance, HOA, maintenance, and utilities may be additional.
Sources & uses
Monthly housing payment
Year-1 operating statement
Projection — rent +3.0%/yr, value +3.5%/yr, expenses +3.0%/yr (CPI 3%)
| Year | Gross rent | EGI | OpEx | NOI | Debt+MI | Cash flow | CoC | DSCR | Value | Loan bal. | Equity | Cum. cash |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | $90,000 | $85,500 | $31,910 | $53,590 | $58,653 | -$16,463 | -36.2% | 0.91x | $724,500 | $680,339 | $44,161 | -$16,463 |
| 2 | $92,700 | $88,065 | $32,867 | $55,198 | $58,615 | -$15,159 | -33.3% | 0.94x | $749,857 | $672,853 | $77,005 | -$31,623 |
| 3 | $95,481 | $90,707 | $33,853 | $56,854 | $58,574 | -$13,815 | -30.4% | 0.97x | $776,103 | $664,825 | $111,278 | -$45,437 |
| 4 | $98,345 | $93,428 | $34,869 | $58,559 | $58,530 | -$12,428 | -27.3% | 1.00x | $803,266 | $656,217 | $147,049 | -$57,865 |
| 5 | $101,296 | $96,231 | $35,915 | $60,316 | $58,482 | -$10,997 | -24.2% | 1.03x | $831,380 | $646,986 | $184,394 | -$68,862 |
| 6 | $104,335 | $99,118 | $36,992 | $62,125 | $58,432 | -$9,522 | -20.9% | 1.06x | $860,479 | $637,089 | $223,390 | -$78,384 |
| 7 | $107,465 | $102,091 | $38,102 | $63,989 | $58,377 | -$8,000 | -17.6% | 1.10x | $890,595 | $626,476 | $264,120 | -$86,384 |
| 8 | $110,689 | $105,154 | $39,245 | $65,909 | $58,319 | -$6,430 | -14.1% | 1.13x | $921,766 | $615,095 | $306,671 | -$92,814 |
| 9 | $114,009 | $108,309 | $40,423 | $67,886 | $58,256 | -$4,811 | -10.6% | 1.17x | $954,028 | $602,892 | $351,136 | -$97,626 |
| 10 | $117,430 | $111,558 | $41,635 | $69,923 | $58,189 | -$3,141 | -6.9% | 1.20x | $987,419 | $589,807 | $397,612 | -$100,766 |
Exit at year 10
Compare: as investor (25% down)
| Metric | Current | Alternative |
|---|---|---|
| Cash to close | $45,500 | $196,000 |
| PITI | $6,264 | $5,048 |
| Yr-1 cash flow | -$16,463 | $9,539 |
| Cash-on-cash | -36.18% | 4.87% |
| DSCR | 0.91x | 1.22x |
| IRR | 11.86% | 14.85% |
| Equity multiple | 5.22x | 3.30x |
Metric lab — how each number is calculated
Change an assumption and watch the formula and result update.
What the building earns in a year after running costs, before the mortgage.
The building's yield if you paid all cash — used to compare properties regardless of financing.
How much cash the deal hands back each year for every dollar you put in.
How many times NOI covers the mortgage. Lenders want 1.20+ — below 1.0 means rent doesn't pay the loan.
Your all-in annual return over the hold, counting cash flow, loan paydown and sale profit, adjusted for timing.
Rents and value compound each year at inflation (CPI) plus any spread you set.
The share of rent you must collect just to pay all costs and the mortgage.
Price as a multiple of yearly rent — a quick screen; lower is cheaper.