Will this building still cash flow after the loan, taxes and reserves?

Written for landlords, property managers and short-term rental hosts across the US, with state detail for California, Texas, New York and Florida.

The short version

1. Work out net operating income (NOI).Rent less vacancy and credit loss, plus other income, less operating costs. Leave out the loan, depreciation, capital items and income tax.
2. Divide NOI by a year's loan payments.That is your DSCR (debt service coverage ratio). Run it with and without reserves deducted, because each lender defines it its own way.
3. Track 13 weeks of cash in and out.Rent by unit and due date, mortgage, tax and insurance escrows, repairs, unit turns, estimated tax dates. Rent in the bank is not profit.

Rent in the bank is not profit. Lenders and buyers look at net operating income (NOI) and how many times it covers the loan payments (DSCR). If you calculate them differently from your lender, you find out at refinance time.

The definitions

• NOI is effective gross income (rent less vacancy and credit loss, plus other income) less operating expenses, before debt service, depreciation, capital items and income tax.
• DSCR is NOI divided by annual debt service. Each lender sets its minimum in its own term sheet.
• Cap rate is NOI divided by the price, before closing costs.
• Cash-on-cash is cash flow after debt service and reserves, divided by the equity you put in.

A 13-week cash view

List rent due by unit and due date, expected delinquency and vacancy, mortgage payments, property tax and insurance escrows, repairs and unit turns, management fees, and estimated tax payments on April 15, June 15, September 15 and January 15. A management company adds payroll and keeps trust money out of its own cash. If property tax is not escrowed, put the county dates in: Texas bills are due by January 31; California installments are due November 1 and February 1 and become delinquent after December 10 and April 10; Florida bills go out in November with early-payment discounts and become delinquent April 1. As of Oct 2026.

Lending differs by size. Conventional and agency loans for 1 to 4 units underwrite your income; DSCR loans underwrite the property's rent against the payment; commercial loans on 5 or more units often carry recourse carve-outs and prepayment penalties. Take rates only from a live, dated quote.

The same deal reads 1.28x or 1.24x depending on where reserves sit, and the lender's definition decides whether you pass.

Asked in Greymill

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Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.

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