A lender sizes an apartment loan two ways at once — debt-service coverage and loan-to-value — and lends the lower of the two. The number is the easy part. Knowing which test produced it is what tells you whether a bigger appraisal, a longer amortization, or more income is the thing that actually moves it.
Enter the property value, unit count, gross scheduled income and your rate assumption. A lender sizes an apartment loan two ways at once and lends the lower of the two — this shows both, and names the one that binds.
Every lender underwrites the building rather than the operator, so every lender adjusts the income you hand them. What differs between desks is how much. A bank or agency execution applies all three of the adjustments below and holds a full coverage cushion on top; private credit takes the expenses largely as presented and will go to a thinner coverage, in exchange for a shorter term and a business plan that has to actually happen. That is the spread you see in the two lanes above, and it is the reason placement is a decision rather than a formality.
Applied by bank and agency lenders at three to five percent of effective gross income even when the owner self-manages. The reasoning is not that the lender doubts you — it is that if they ever take the building back, they are hiring a manager. Owners routinely omit it because it is not a cost they pay. Lenders never do.
Typically $250 to $300 per unit per year on multifamily, deducted before net operating income rather than treated as a capital item — a bank and agency convention that most private credit does not impose. Roofs, boilers and turnovers are real annual costs even in a year you do not spend the money. On a 20-unit building that is several thousand dollars off net operating income before any test is run — which moves the coverage test and the debt yield you are reading together.
Underwritten at a market minimum — commonly five percent — even when the building is one hundred percent occupied on the day you apply. This is the one adjustment both lanes make. Full occupancy today is not evidence of full occupancy across a ten-year loan term, and no credit committee will size against it.
Debt yield is net operating income divided by the loan — the lender's day-one return if they took the building back tomorrow. It is not one of the two tests that size your loan, and on $1M–$5M multifamily most of the lenders Blue Sky Capital Advisors places with do not underwrite to it as a primary constraint. It is reported above because of what it is: the one figure that is both leverage- and rate-independent, so it cannot be engineered with a longer amortization or an interest-only period.
That independence is what makes it worth reading. Coverage improves the moment you stretch amortization; debt yield does not move at all. So when a deal clears coverage comfortably and the debt yield still looks thin, the sizing is being carried by loan structure rather than by the building — and on the balance sheets that do weigh it, usually the larger institutions and the conduits, that is where a file gets questioned. Reading it early is how you find that out before an appraisal, not after.
The two lanes above apply these assumptions to your building and re-run both tests in each, so the bank number and the private-credit number sit side by side. On most stabilized deals the gap is larger than sponsors expect, and it is almost always the reason a quoted proceeds figure comes back lower than the one they modeled — or, in the other direction, the reason a deal a bank passed on still gets done. Blue Sky Capital Advisors places across both.
Send the basics — property, county, loan size, the story. Within 24 hours on a business day, you'll have a straight answer: whether this deal places with the lenders we work with, and if it doesn't, why — before you pay for an appraisal or an application anywhere.
Got it. You will have a straight answer on whether this deal places within 24 hours on a business day — including the reason if it does not.
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Blue Sky Capital Advisors arranges multifamily financing nationally, with the deepest lender coverage in New Jersey and South Florida. Once you know which test is binding, the market you are in decides who to approach.
A sizing tells you what the building supports. It does not tell you which lender will actually do it, at what structure, or how fast. Blue Sky Capital Advisors places multifamily deals across a network of more than one hundred bank and private-lender relationships, and takes the file to the ones whose appetite matches the constraint that is binding yours.
Prefer to talk it through? (908) 220-6404, or price your loan with the full intake.