A broker sent me a 12-unit deal last Tuesday at 2:14 PM. By 2:47 PM I had a verdict: pass. Not because it was a bad building. Because the math didn't work at the asking price, and I could prove it on a single sheet of paper.

You don't need a 40-tab spreadsheet to evaluate a small multifamily deal. You need five numbers, a napkin, and the discipline to trust the math over your excitement. Here's exactly how I do it.

Step 1: Gross Rent (3 Minutes)

Pull the rent roll. If the broker hasn't provided one, that's your first red flag.

For this deal, the rent roll showed 12 units. Eight two-bedrooms at $1,050/month and four one-bedrooms at $875/month. That gives us:

8 x $1,050 = $8,400

4 x $875 = $3,500

Monthly gross: $11,900

Annual gross: $142,800

Write that number down. Everything else flows from it.

Now sanity-check against the market. I pulled comps in the same zip code for the same vintage building. Two-bedrooms were leasing at $1,100 to $1,175. One-bedrooms at $900 to $950. So the current rents are slightly below market. That's a good sign. It means there's modest upside without heroic assumptions.

Don't use "pro forma" rents in your initial analysis. Use actual, in-place rents. You can model the upside later. Right now we're testing whether the deal works today, not in some imaginary future where everything goes perfectly.

Step 2: Expense Ratio (5 Minutes)

Here's where most new investors get it wrong. They underestimate expenses because they have never operated a building.

For a 12-unit property in Omaha, I use a 45-50% expense ratio as my baseline for back-of-napkin analysis. That includes property taxes, insurance, maintenance, management fees, vacancy, landscaping, snow removal, and reserves. Everything except debt service.

Is 45-50% exact? No. But it's close enough to tell you whether to keep going or stop wasting time. I have operated buildings that run at 38%. I have seen buildings that run at 58%. The ones running at 38% are well-managed. The ones at 58% are problems. For initial screening, 48% is your number.

$142,800 x 0.48 = $68,544 in estimated expenses

Some investors use 40%. I think that's aggressive unless you're self-managing and not accounting for your own time. Some use 50%, which is conservative but safe. Split the difference for the first pass. You will rebuild the expenses line by line in full underwriting if the deal makes it past this screen.

Step 3: NOI (30 Seconds)

This is the simplest step and the most important number in the entire analysis.

$142,800 - $68,544 = $74,256 NOI

Net Operating Income. The money left after all operating expenses but before debt service. This is what the property actually earns.

Write it down. Circle it. This number determines everything that follows.

Step 4: Does the Debt Work? (10 Minutes)

The asking price on this deal was $1,050,000. Let us say we put 25% down, which is standard for a commercial multifamily loan.

Down payment: $262,500

Loan amount: $787,500

Terms: 6.75% interest, 25-year amortization

Annual debt service on that loan comes out to roughly $65,700 per year ($5,475/month).

Now the critical test:

DSCR (Debt Service Coverage Ratio) = NOI / Annual Debt Service

$74,256 / $65,700 = 1.13

A DSCR of 1.13 means for every dollar of debt service, the property generates $1.13 in NOI. Most lenders want 1.20 to 1.25 minimum. We're below the threshold. That's a problem.

It means one of three things needs to change: the price needs to come down, the rents need to go up, or you need better loan terms. On a napkin analysis, this tells me the deal is tight at the asking price. Not dead, but tight.

What About Cap Rate?

Cap rate is simple: NOI / Purchase Price.

$74,256 / $1,050,000 = 7.07%

A 7% cap in Omaha for a B-class 12-unit is reasonable. Not a steal, not a rip-off. But here's the thing. Cap rate tells you what the market thinks of the deal. DSCR tells you whether you can actually service the debt. I have seen plenty of deals with attractive cap rates that still had DSCR problems because of where interest rates are right now. In 2026, with rates in the mid-to-high 6s, the spread between cap rate and cost of debt is thin. You have to check both.

Step 5: Cash-on-Cash Return (5 Minutes)

This is the number that tells you what your actual invested capital earns.

Annual cash flow = NOI - Debt Service

$74,256 - $65,700 = $8,556

Total cash invested = Down payment + closing costs (estimate 3%)

$262,500 + $31,500 = $294,000

Cash-on-Cash = $8,556 / $294,000 = 2.9%

A 2.9% cash-on-cash return is below what I would accept. My minimum threshold is 8% for a stabilized deal and 6% for a value-add where I can model the upside with confidence. At 2.9%, I'm basically buying myself a second job for the privilege of earning less than a money market account.

The Verdict

Thirty minutes. Five numbers. Clear answer.

This deal doesn't work at $1,050,000 with current rents and current interest rates. The DSCR is below lender minimums and the cash-on-cash return doesn't justify the risk.

But that doesn't mean the deal is dead. It means I know exactly what it would take to make it work.

If I could buy at $875,000, the DSCR jumps to 1.30 and cash-on-cash hits 7.8%. That's a real deal.

If the rents can be pushed to market ($1,150 on the two-beds, $950 on the one-beds), the NOI goes to roughly $84,000 and the numbers start working even at $950,000.

If the seller will carry a second at favorable terms, the blended cost of capital drops and the deal opens up.

This is the power of the napkin analysis. It doesn't just give you a yes or no. It tells you what the deal needs to look like in order to say yes. That's the information you bring to the negotiating table.

The Framework, Condensed

For every small multifamily deal that hits your desk:

1. Gross rent. Actual, in-place. Sanity-check against comps. 2. Expense ratio. 45-50% for Midwest B/C product. Adjust if you have actuals. 3. NOI. Gross rent minus expenses. The only number that matters. 4. DSCR. Must be 1.20+ for lender approval and your own safety. 5. Cash-on-cash. Your real return on invested capital. Know your minimum.

This takes 30 minutes. It tells you whether to spend another 30 hours on full underwriting or move on to the next deal. Most deals fail this screen. That's the point. Your time is worth more than chasing deals that were never going to work.

The spreadsheet comes later. The napkin comes first.

Looking at a deal in the Omaha or Lincoln market? We'll pressure-test your numbers for free. Reach out at Tanner@TopTierInvestmentFirm.com.

Tanner Sherman is the Principal and Managing Broker of Top Tier Investment Firm in Omaha, Nebraska. He co-hosts the Freedom Fighter Podcast with Ryan of Avara Investments.

How to Analyze a 12-Unit Deal in 30 Minutes