DSCR vs. Cashflow vs. cap rate Who wins?

[Adam Fansler]

Hey BP,

I am re-focusing my investing from "pigs" to multifamily. I have a goal to analyze 50 deals just to get used to the numbers and where they go. My dilemma is this: when looking at deals I come up with great DSCR I think (higher than 1.2) cash flow after all expenses is greater than $100 per door, however if I take the net operating income and divide it by the cap rate for my area (8.5%) it comes out substantially less than the asking price. Am I totally off to compare all 3?

Loan Terms
Purchase Price	$155,000	Amortization (Years)	30
Loan Amount	$124,000	Annual Debt Service	$7,104
Loan to Value (LTV)	80.0%	Monthly Loan payment	$592
Interest Rate	4.00%	Offer Price	$112,027.06
Income		Profit and Loss
	Gross Annual Rental Income (use current Rent Roll or 1040 Schedule "E")	$17,400
	Other Income				$3,060
Total Annual Rents				$20,460	100%
	Less Vacancy (Minimum Actual % or 5% [Office 10%] of Total Rents )	$2,046
Effective Annual Gross Income (E.G.I.)			$18,414
Annual Operating Expenses
	Management Fees (minimum actual % or 5% of EGI)			$921
	Utilities / Water Sewer/Telephone				$0
	Repairs and Maintenance (.50 sq.ft./yr)			$978
	Salaries / Legal / Admin / Advertising			$300
	Snow / Trash				$1,736
	R.E. Taxes				$2,957
	Insurance .25/sq/ft. avg				$1,500
	Other				$0
	Less Reserves (Minimum $250 /apt, $0.15 /sf for Retail and Industrial, & $.20 /sf for Office )			$500
Total Operating Expenses				$8,892	43.5%
NOI				$9,522
Cash Flow				$9,522	46.5%
	Less Annual Debt Service				$7,104
Cash Flow After Debt Service				$2,418
Debt Service Coverage Ratio (DSCR)				1.34x
Cash Flow Per Unit Per Month				$100.77
Footnotes:Minimums $100 Per mo./unitDSCR 1.2 or

[Adam Fansler]

(Sorry I cleaned it up)

Loan TermsPurchase Price$155,000

Amortization (Years)30 Loan Amount$124,000

Annual Debt Service$7,104 Loan to Value (LTV)80.0%

Monthly Loan payment$592 Interest Rate4.00%

Offer Price$112,027.06

 IncomeProfit and LossGross Annual Rental Income (use current Rent Roll or 1040 Schedule "E")$17,400

 Other Income$3,060

Total Annual Rents$20,460

Less Vacancy (Minimum Actual % or 5% [Office 10%] of Total Rents )$2,046

Effective Annual Gross Income (E.G.I.)$18,414

 Annual Operating Expenses

Management Fees (minimum actual % or 5% of EGI)$921

Utilities / Water Sewer/Telephone$0

 Repairs and Maintenance (.50 sq.ft./yr)$978

 Salaries / Legal / Admin / Advertising$300

Snow / Trash$1,736

 R.E. Taxes$2,957

Insurance .25/sq/ft. avg$1,500 Other$0

 Less Reserves (Minimum $250 /apt, $0.15 /sf for Retail and Industrial, & $.20 /sf for Office )$500

 Total Operating Expenses$8,892

NOI$9,522

Cash Flow$9,522

Less Annual Debt Service$7,104

Cash Flow After Debt Service$2,418

Debt Service Coverage Ratio (DSCR)1.34x

Cash Flow Per Unit Per Month$100.77

Footnotes:Minimums $100 Per mo./unitDSCR 1.2 or Higher