Fictional case study

Harborview Apartments

900 Harborview Drive, Tampa, FL — 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.

What this deal teaches

Practice underwriting a larger multifamily property and testing downside scenarios.

At twelve units the expense structure changes: professional management, owner-paid utilities, real reserves, and Florida insurance all sit between gross rent and NOI. The lender looks at DSCR, not at your optimism.

Advanced

Multifamily underwriting & DSCR

Property overview

Property type: Multifamily
Units: 12
Fictional address: 900 Harborview Drive, Tampa, FL — Fictional
Learning focus: Multifamily underwriting

Purchase and financing assumptions

Purchase price: $2,000,000
Down payment: 40% ($800,000)
Loan amount: $1,200,000
Interest rate: 5.50%
Loan term: 30 years
Amortization: 30 years

Income assumptions

Unit 101 — 1 bed / 1 bath$1,575 / mo
Unit 102 — 1 bed / 1 bath$1,575 / mo
Unit 103 — 1 bed / 1 bath$1,575 / mo
Unit 104 — 1 bed / 1 bath$1,575 / mo
Unit 105 — 1 bed / 1 bath$1,575 / mo
Unit 106 — 1 bed / 1 bath$1,575 / mo
Unit 107 — 1 bed / 1 bath$1,575 / mo
Unit 108 — 1 bed / 1 bath$1,575 / mo
Unit 201 — 2 bed / 1 bath$1,725 / mo
Unit 202 — 2 bed / 1 bath$1,725 / mo
Unit 203 — 2 bed / 1 bath$1,725 / mo
Unit 204 — 2 bed / 1 bath$1,725 / mo

Monthly base rent: $19,500
Monthly other income: $900
Annual gross potential income: $244,800
Vacancy: 7%
Credit loss: 1%
Effective gross income: $225,216

Expense assumptions

Property taxes$26,000
Insurance$22,000
Repairs and maintenance$13,500
Property management$9,000
Utilities$10,800
Landscaping and snow removal$3,600
Trash$2,400
Licensing and permits$900
Reserves / CapEx$7,200

Annual operating expenses: $95,400
Expense ratio: 42.36%
Annual NOI: $129,816

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: $800,000
Closing costs: $45,000
Initial repairs: $25,000
Total cash required: $870,000

Calculated results

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

Gross potential income: $244,800
Effective gross income: $225,216
Annual NOI: $129,816
Monthly mortgage payment: $6,813.47
Annual debt service: $81,761.62
Annual cash flow: $48,054.38
Monthly cash flow: $4,004.53
Cap rate: 6.49%
Cash-on-cash return: 5.52%
DSCR: 1.59
LTV: 60.00%
Break-even occupancy: 72.37%

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: 3%
Exit cap rate: 6.75%
Selling costs: 5% of sale price

Downside scenario

Operating expenses rise 10% and vacancy rises to 10%

Florida insurance renewals and a softer leasing market are the two most common shocks for this property type. This scenario raises every operating expense by 10% and moves vacancy from 7% to 10%, leaving rents, price and financing unchanged.

NOI (base case): $129,816
NOI (downside): $112,932
DSCR (base case): 1.59
DSCR (downside): 1.38
Monthly cash flow (base case): $4,004.53
Monthly cash flow (downside): $2,597.53

Strengths

Twelve units make income far less dependent on any single tenant
Debt coverage is strong at the assumed 60% loan-to-value
Other income from parking, laundry and storage is a real contributor

Risks

Florida insurance is a large and volatile expense line
The deal requires a very large amount of upfront cash
A 10% expense increase plus higher vacancy visibly compresses NOI and DSCR

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

Investment decision

Using the PropertyU framework — BUY, INVESTIGATE, or PASS — based only on the information shown above.

INVESTIGATE

Base-case coverage is healthy, but the downside test shows how quickly NOI and DSCR fall when insurance and vacancy move together. A binding insurance quote, trailing twelve-month operating statements, and a verified rent roll come before any commitment.

The highest cap rate is not automatically a buy, and positive cash flow alone is not a reason to buy.

Beginner takeaway

Larger properties are underwritten on the durability of NOI, not on the headline cap rate.

Multifamily underwriting

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.