Two apartment buildings with similar unit counts and rental income can have very different financial performance because their operating expenses are not necessarily the same. One property may have newer systems, efficient management and predictable maintenance costs, while another may require frequent repairs or carry higher insurance and utility expenses. For investors considering loans for multifamily homes, understanding these differences is essential. A property’s rental revenue is only one part of its financial profile; the expenses required to keep it operating determine how much income remains before debt service.
Property taxes and insurance are often significant recurring costs, but they are not the only expenses to review. Maintenance, repairs, property management, landscaping, cleaning, utilities paid by the owner and other operating costs can affect annual NOI. Some expenses may change after an acquisition. For example, insurance premiums may be reassessed, management fees may differ under a new contract, or deferred maintenance may lead to higher repair costs. Review historical operating statements and ask questions about unusual changes rather than assuming last year’s expense figures will remain constant.
A useful way to assess expenses is to compare actual costs with the building’s operating history and the work it needs. Separate recurring operating expenses from one-time capital improvements, such as a major roof replacement or structural upgrade. These items may affect the investment budget, but they are not treated the same way as routine operating expenses in a standard NOI calculation. Investors should also avoid removing legitimate costs simply to produce a higher NOI. An inflated figure can distort valuation assumptions and make the financing plan less reliable.
For multifamily investment loans, lenders use NOI to understand the property’s ability to support debt. InstaLend evaluates stabilised multifamily assets using NOI, DSCR and property value, with no personal W-2 or tax return requirement for its term loan programme. Eligible properties generally have 5+ residential units, and occupancy of 85% or higher is preferred. The programme offers loan amounts from $500,000 to $10M+, subject to underwriting. We recommend reviewing every major expense category before applying. A realistic operating budget gives you a more dependable NOI figure and helps you make a better-informed investment decision.