Replacement Reserves NOI Impact Calculator
Commercial lenders and serious buyers always deduct replacement reserves from NOI. Sellers exclude them to inflate cap rate. Calculate the real underwritten NOI and cap rate using industry-standard reserve amounts.
| Seller-stated NOI | — |
| Annual replacement reserve | — |
| Adjusted (underwritten) NOI | — |
| Stated cap rate (seller pitch) | — |
| Underwritten cap rate (real) | — |
| Implied value reduction (at stated cap) | — |
Replacement reserves are mandatory deductions from commercial NOI used by lenders and serious buyers. Sellers leave them out of marketing materials to inflate the stated cap rate. Industry-standard multifamily reserve: $250/unit/year (newer) to $500/unit/year (older). Plug them in and you'll see how seller's 7.5% pitched cap rate quietly drops to 6.8% underwritten cap.
Why Reserves Exist
Roofs, HVAC, parking lots, exterior paint, and appliances wear out on predictable schedules. Underwriters smooth those big-ticket capex hits into an annual line item so NOI reflects true sustainable income, not a peak year between major capex. Without reserves, NOI looks inflated and the buyer overpays at acquisition, then takes a real cash hit when reserves are needed.
Standard Reserve Amounts by Asset Class
Per Fannie Mae/Freddie Mac/HUD multifamily underwriting: Newer multifamily (post-2000): $150-$250/unit/year. Standard Class B/C multifamily: $250-$300/unit/year. Older 1970s+ stock: $300-$500/unit/year. Office: $0.25-$0.50/sqft/year. Retail: $0.15-$0.30/sqft/year. Industrial: $0.10-$0.20/sqft/year. Use these as baseline and adjust up for properties with deferred maintenance.
Last updated May 2026. Sources: Fannie Mae Multifamily Underwriting.