For sellers & buyers
AFH Occupancy & Financing Calculator
At this price, with this many residents, can a buyer get the loan? A lender divides the home's net operating income by the annual loan payment and wants at least 1.25×. Below that, the loan is declined or reduced and the buyer has to offer less. New to this? Start with How to Finance an Adult Family Home.
Why I built this
I built this after working through a real sale where everything came down to one question: would a lender approve the loan at that price with the residents the home actually had? Every empty bed changes the answer. This shows you how much before you're in front of a lender.
— David Stein, founder of Real Property Planning
AFH Club Calculator
Can a Buyer Get the Loan?
Lender coverage by price and occupancy, for an owner-operator or an investor
The home
Sets how many bed boxes appear below.
Monthly rate for each bed (leave empty beds blank)
Today: $28,000 a month from 4 of 6 beds ($336,000 a year). Empty beds are modelled at today's average rate ($7,000) when residents are added.
= $150,000
Costs that do not change with one more resident: base staff, insurance, utilities, license, maintenance.
= $18,000
Extra food, supplies and care hours for each added resident.
Who is the buyer?
An owner-operator does the work, so a lender counts all the income. An investor hires staff for it, so the lender subtracts those wages first.
Price and financing
= $1,500,000
The house. This is the price the calculator tests.
SBA 7(a): typically 10%. Conventional on a house: 20–25%.
SBA 7(a) is Prime plus a spread; conventional on the house alone is lower.
= $14,000
Most SBA lenders want 1.25×; some accept 1.15×.
Is the buyer also financing the business?
Any loan on the license, contracts and residents is repaid from the same income, so a lender counts it too.
= $150,000
Added to the main loan at the rate and term above.
Coverage ratio today · 4 of 6 beds
0.67×
The lender needs 1.25×: 2 more residents short. It first works at 6 residents.
Most a lender would finance at today's occupancy: $668,150 for an owner-operator, versus $0 for an investor who hires staff.
Net income needed
$212,116
Net income today
$114,000
Annual debt service
$169,693
Property price
$1,500,000
Total deal
$1,650,000
Max financeable today
$668,150
By occupancy
| At this property price | 3 of 6 beds | 4 of 6 beds (today) | 5 of 6 beds | 6 of 6 beds |
|---|---|---|---|---|
| Annual gross income | $252,000 | $336,000 | $420,000 | $504,000 |
| Net operating income to a buyer | $48,000 | $114,000 | $180,000 | $246,000 |
| Coverage ratio | 0.28× | 0.67× | 1.06× | 1.45× |
| Lender approves? | No | No | No | Yes |
| Cash to buyer after debt service | ($121,693) | ($55,693) | $10,307 | $76,307 |
| Most a lender would finance (property) | $108,586 | $668,150 | $1,227,714 | $1,787,277 |
Coverage by property price
3 of 6 beds
4 of 6 beds (today)
5 of 6 beds
6 of 6 beds
Lender requirement (1.25×)
- 3 beds: 0.28×, below the requirement; works at $105,000 or less
- 4 beds (today): 0.67×, below the requirement; works at $665,000 or less
- 5 beds: 1.06×, below the requirement; works at $1,225,000 or less
- 6 beds: 1.45×, above the requirement; a lender can approve
Working estimates for discussion. SBA 7(a) rates are Prime plus a spread and change with the market; a buyer's actual terms depend on their lender and file. Not a loan quote or an appraisal. Private-pay defaults come from the featured broker's reviewed ranges for King, Snohomish and Pierce counties.
Frequently Asked Questions
Financing an Adult Family Home: Common Questions
Lenders divide the home's net operating income by the annual loan payment (principal, interest, property tax and insurance) and want the result to be at least about 1.25× (one and a quarter times the payment). So the minimum net income is roughly 1.25 times the annual debt service at the proposed price. For a $2 million purchase financed with a 10%-down SBA 7(a) loan at current rates, that is in the region of $250,000 a year.
Most adult family homes are owner-operated: the owners provide many of the care hours themselves. A buyer who will not work those hours has to pay staff to cover them, so lenders subtract replacement wages before they count the income. A home that nets $150,000 to its owners may net far less to a buyer on paper.
Yes, more than almost anything else. Each additional resident adds a full year of rate to the top line while adding little to costs, because the house, license, insurance and base staff are already paid for. Two residents can move a home from a loan the lender declines to one it approves at full price. Lenders underwrite last year's tax returns, so occupancy must be real, not projected.
It is a bank loan partly guaranteed by the U.S. Small Business Administration, which lets the bank accept about 10% down and terms up to 25 years when real estate is included. The rate is variable, set at the WSJ Prime rate plus a spread. Buyers use it because few can put 25% down on a $2 million home. The SBA 504 program is an alternative for the real estate portion at a lower fixed rate.
Fill empty beds before or during the listing; state the price split between property and business so each can be financed correctly; and consider carrying the business portion on seller financing, which removes the buyer's most expensive loan. Lowering the price is the last lever, not the first.
Testing whether the loan will carry?
Occupancy assumptions, SBA terms, and the CHOW timeline decide whether a purchase works. Ask how lenders will read this home before you go to them.
Ask about financingProperty questions go to David Stein, the featured broker and appraiser (eXp Realty), independently of Real Property Planning.