The NOI required for a multifamily refinance loan depends on the property’s annual debt service and the lender’s minimum debt service coverage ratio (DSCR). There is no universal income threshold that applies to every apartment building. A property with a higher loan payment generally needs more NOI than a similar building with lower debt obligations. Investors should therefore calculate the required income using the proposed loan terms rather than relying on a general NOI benchmark.
The calculation is straightforward: required NOI equals annual debt service multiplied by the minimum required DSCR. Suppose the proposed loan has annual debt service of $180,000 and the lender requires a DSCR of 1.25x. The property would need at least $225,000 in annual NOI. At a 1.20x requirement, the same debt service would require $216,000. These examples are illustrative; the applicable DSCR depends on the lender and loan programme.
To establish actual NOI, calculate effective gross income by subtracting vacancy and credit losses from potential rent, then adding documented additional income. Deduct operating expenses such as insurance, property taxes, utilities, maintenance and management costs. Do not deduct mortgage payments when calculating NOI because debt service is assessed separately through DSCR. Also distinguish actual operating results from projected improvements. If a building is expected to achieve higher rents after renovations, those increases should not be treated as current income without supporting evidence and appropriate underwriting treatment.
If your property falls short of the required NOI, consider whether the financing amount can be reduced or whether operating performance can improve. Potential measures include reducing avoidable vacancies, bringing below-market rents closer to market levels as leases expire, reviewing vendor contracts and documenting permitted additional income. However, improvements must be realistic and consistent with local market conditions. Investors should also evaluate property value, occupancy and other underwriting tests because meeting the DSCR requirement alone does not guarantee approval. InstaLend’s published multifamily term loan criteria list a minimum DSCR range of 1.20x to 1.25x. Calculating your required NOI before applying can help you estimate borrowing capacity and identify gaps in your refinancing plan.