An apartment building’s unit count does not tell you how much rental income it is currently producing. Occupancy plays a major role because vacant units generally mean lost rental revenue, while occupied units contribute to the property’s operating income. When assessing loans for multifamily homes, investors should look at both the occupancy percentage and the actual rent being collected. A building with 30 apartments and 90% occupancy may have a different income profile from another building of the same size, depending on lease rates, payment history and operating expenses.
Calculate physical occupancy by comparing the number of occupied units with the total number of rentable units. For example, if 27 out of 30 apartments are occupied, physical occupancy is 90%. However, physical occupancy does not always reflect the full financial picture. Some tenants may be behind on rent, while other units may be occupied at rates below current market levels. Reviewing the rent roll, lease agreements and collection history helps you understand how much income the building is actually generating. Also check whether units are temporarily unavailable because of repairs or renovation work.
Occupancy improvements can support NOI when vacant units are leased and rent is collected consistently. However, filling every unit does not automatically guarantee stronger profitability. Investors need to consider the cost of preparing apartments, leasing expenses, concessions, maintenance and management. If a building requires substantial repairs before units can be occupied, the cost and timeline of that work should be included in the investment plan. A realistic lease-up strategy should explain how the property will move from its current occupancy level toward stabilised operations without relying on unsupported rent assumptions.
For multifamily investment loans, occupancy is considered alongside NOI, DSCR, property condition and asset value. InstaLend’s multifamily term loan programme is designed for stabilised apartment buildings with 5+ residential units, with 85% or higher occupancy preferred. Qualification is based on property income rather than personal W-2s or tax returns, and the programme looks for a minimum DSCR of 1.20x–1.25x. Loan amounts range from $500,000 to $10M+, subject to underwriting. Reviewing occupancy and collections together gives you a more accurate view of the building’s financial position before pursuing long-term financing.