A multifamily property can look excellent in a listing and still become an expensive lesson. The numbers should work with income you can verify, expenses you can defend, and a physical plan you can afford.
Start with income that actually exists
Ask for the current rent roll, every lease and amendment, at least the trailing 12 months of operating statements, and support for other recurring income. Compare the rent roll with the leases and payment history. Identify concessions, delinquent balances, month-to-month tenancies, prepaid rent, security deposits, and units occupied by an owner, employee, or relative.
Then separate current rent from proposed rent. A seller may be correct that rents are below the market, but higher rent is not automatic income. It can require renovations, turnover, notice periods, better management, or a different utility arrangement. Underwrite the building as it operates now, then prepare a separate stabilized case.
Rebuild net operating income yourself
Do not rely only on the advertised net operating income, or NOI. Begin with gross potential rent at the rents you are underwriting. Subtract a realistic vacancy and collection allowance. Add supportable laundry, parking, storage, or other recurring income. Then subtract normal operating expenses.
Property operations
Taxes, insurance, water and sewer, owner-paid utilities, trash, snow, landscaping, pest control, and licenses.
Repairs and turnover
Routine repairs, service calls, cleaning, unit turns, and an allowance for the maintenance that does not appear every month.
Management
Include management even if you plan to self-manage. Your time has value, and a future buyer or lender will usually include it.
Items outside NOI
Debt service, depreciation, income taxes, and major capital projects are generally analyzed separately. Confirm each lender's definition.
Normalize the Maine expenses
Maine buildings can punish a thin expense budget. Review actual fuel and utility bills, not just annual totals. Determine which utilities are separately metered and which are included in rent. Inspect boilers, oil tanks, heat pumps, domestic hot-water systems, roofs, insulation, drainage, and areas vulnerable to freezing.
Budget for snow and ice management, seasonal grounds work, routine plumbing and heating calls, turnover, and an appropriate capital reserve. Obtain an insurance indication early. Review the municipal tax card and current bill, then ask how a sale or planned work could affect future assessment. Assumptions from one Maine municipality do not automatically transfer to another.
Run more than one scenario
At minimum, calculate a current case, a realistic stabilized case, and a stress case. Test lower rent growth, a vacancy period, an insurance increase, a large repair, and a higher financing cost. No single ratio tells the complete story.
Capitalization rate
NOI divided by purchase price. Make sure the NOI definition is consistent before comparing properties.
Debt-service coverage
NOI divided by annual loan payments, subject to the lender's own calculation and reserve requirements.
Cash-on-cash return
Annual pre-tax cash flow divided by the cash invested. Include all cash needed to acquire and stabilize the property.
Break-even pressure
Test how quickly vacancy, repairs, or financing changes use the available cash flow and reserves.
Review tenant and compliance files
A purchaser is acquiring an operating housing business, not only a building. Have leases, deposits, notices, arrears, disputes, utility arrangements, and management practices reviewed. Confirm that every deposit to be transferred is fully accounted for.
Maine rental housing can involve disclosure, deposit, radon, lead, energy, smoking-policy, and other requirements. Fair-housing rules apply to advertising, screening, leasing, and management. These files deserve professional review; a spreadsheet cannot reveal a defective lease or an unlawful practice.
Inspect the building and the site
Use qualified professionals appropriate to the property. Review structure, roof, exterior envelope, electrical and plumbing systems, heat, fire and life-safety conditions, water supply, and wastewater disposal. For older housing, address lead-based-paint requirements. Review radon history and testing, underground tanks, flood exposure, shoreland limitations, wetlands, and past environmental concerns where relevant.
If the property has a private well or septic system, obtain records and testing rather than relying on appearance. Older records may be incomplete, which makes present-day professional evaluation more important rather than less.
Put the investigation into the offer
A well-written offer should provide enough time and access to complete financial, lease, title, inspection, financing, appraisal, insurance, and environmental review. It should identify which documents the seller must provide and preserve the buyer's agreed rights if the results are unsatisfactory.
The purpose is not to make every offer complicated. It is to avoid learning after closing that the income was temporary, the expenses were incomplete, or the next major repair was already visible.