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PropertyU

Fictional case study

Charlotte Triplex — Renovation-Heavy Value Add

4500 Queen City Road, Charlotte, NC — Fictional

Fictional educational example

This property, address, and every number below are fictional and provided only for education. Nothing here is an active listing or investment advice.

Property overview

Property type
Triplex
Units
3
Fictional address
4500 Queen City Road, Charlotte, NC — Fictional
Learning focus
Renovation deal

Purchase and financing assumptions

Purchase price
$525,000
Down payment
20% ($105,000)
Loan amount
$420,000
Interest rate
7.00%
Loan term
30 years
Amortization
30 years

Income assumptions

  • Unit A — 2 bed / 1 bath$1,800 / mo
  • Unit B — 2 bed / 1 bath$1,750 / mo
  • Unit C — 2 bed / 1 bath, month to month$1,550 / mo
Monthly base rent
$5,100
Monthly other income
$200
Annual gross potential income
$63,600
Vacancy
6%
Credit loss
1%
Effective gross income
$59,148

Expense assumptions

  • Property taxes$5,600
  • Insurance$2,600
  • Repairs and maintenance$3,200
  • Property management$4,200
  • Utilities$2,100
  • Landscaping and snow removal$800
  • Trash$720
  • Licensing and permits$380
  • Reserves / CapEx$1,800
  • Pest control$600
Annual operating expenses
$22,000
Expense ratio
37.19%
Annual NOI
$37,148

NOI = effective gross income − operating expenses. Debt service is not an operating expense, which is why NOI is the same whether the property is financed or not.

Upfront cash breakdown

Down payment
$105,000
Closing costs
$12,000
Initial renovation and repairs
$45,000
Total cash required
$162,000
  • Kitchen improvements: $20,000
  • Roof work: $15,000
  • Unit turns and paint: $10,000

Calculated results

Calculated with the shared PropertyU financial engine from the assumptions above.

Gross potential income
$63,600
Effective gross income
$59,148
Annual NOI
$37,148
Monthly mortgage payment
$2,794.27
Annual debt service
$33,531.25
Annual cash flow
$3,616.75
Monthly cash flow
$301.40
Cap rate
7.08%
Cash-on-cash return
2.23%
DSCR
1.11
LTV
80.00%
Break-even occupancy
87.31%

Hold and exit assumptions

These carry over to Deal Lab so you can test a different hold period or exit cap rate.

Hold period
5 years
Annual rent growth
3%
Annual expense growth
2%
Exit cap rate
7.25%
Selling costs
6% of sale price

Strengths

  • Three income-producing units
  • Positive projected cash flow
  • Renovations may improve the property's condition

Risks

  • Requires approximately $162,000 upfront
  • Low cash-on-cash return despite positive cash flow
  • Renovation cost overruns could weaken the deal
  • DSCR has a limited safety cushion

Missing information to verify in a real deal

  • Actual signed leases
  • Verified rent roll
  • Insurance quote
  • Property inspection report
  • Utility bills
  • Contractor estimates
  • Local rental comparables

Beginner takeaway

A renovation deal may improve a property, but the additional cash invested can reduce the return on that cash.

Renovation deal

Experiment with this deal

Deal Lab opens with every assumption above prefilled as your own working copy. Change the rent, vacancy, expenses, interest rate, renovation budget, or exit cap rate and the results recalculate. The practice deal itself never changes.

Back to Deal Library

Fictional example for education only. Results depend entirely on the assumptions shown and are not investment, lending, tax, or legal advice.