Fictional case study
Maple Court Fourplex
2210 Maple Court, Denver, CO — Fictional
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
See why cap rate and leveraged cash flow can tell different stories.
Maple Court has a healthy property-level return, yet monthly cash flow is only a few hundred dollars. The difference is the loan: cap rate measures the property, cash flow measures what is left after the lender is paid. Change the down payment, rate, or amortization and the cash flow moves even though the cap rate does not.
Property overview
- Property type
- Fourplex
- Units
- 4
- Fictional address
- 2210 Maple Court, Denver, CO — Fictional
- Learning focus
- Income & NOI
Purchase and financing assumptions
- Purchase price
- $420,000
- Down payment
- 25% ($105,000)
- Loan amount
- $315,000
- Interest rate
- 7.00%
- Loan term
- 30 years
- Amortization
- 30 years
Income assumptions
- Unit A — 2 bed / 1 bath$1,200 / mo
- Unit B — 2 bed / 1 bath$1,200 / mo
- Unit C — 1 bed / 1 bath, month to month$1,150 / mo
- Unit D — 1 bed / 1 bath$1,050 / mo
- Monthly base rent
- $4,600
- Monthly other income
- $150
- Annual gross potential income
- $57,000
- Vacancy
- 5%
- Credit loss
- 1%
- Effective gross income
- $53,580
Expense assumptions
- Property taxes$6,300
- Insurance$2,400
- Repairs and maintenance$2,600
- Property management$4,300
- Utilities$3,000
- Landscaping and snow removal$900
- Trash$1,100
- Licensing and permits$400
- Reserves / CapEx$2,600
- Annual operating expenses
- $23,600
- Expense ratio
- 44.05%
- Annual NOI
- $29,980
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
- $9,000
- Initial repairs
- $6,000
- Total cash required
- $120,000
Calculated results
Calculated with the shared PropertyU financial engine from the assumptions above.
- Gross potential income
- $57,000
- Effective gross income
- $53,580
- Annual NOI
- $29,980
- Monthly mortgage payment
- $2,095.70
- Annual debt service
- $25,148.43
- Annual cash flow
- $4,831.57
- Monthly cash flow
- $402.63
- Cap rate
- 7.14%
- Cash-on-cash return
- 4.03%
- DSCR
- 1.19
- LTV
- 75.00%
- Break-even occupancy
- 85.52%
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
- 2.5%
- Exit cap rate
- 7.25%
- Selling costs
- 6% of sale price
Strengths
- Four units spread vacancy risk across more tenants
- Cap rate is solid for the market
- Rents are supported by a full rent roll rather than one lease
Risks
- Leveraged cash flow is thin despite the strong cap rate
- The owner pays common-area utilities, which are exposed to rate increases
- A single extended vacancy consumes several months of cash flow
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.
The property-level economics are sound, but almost all of the NOI goes to debt service at this rate and down payment. Before committing, test the deal at a lower rate, a larger down payment, and with the owner-paid utilities verified against actual bills. The cap rate alone is not the reason to buy.
The highest cap rate is not automatically a buy, and positive cash flow alone is not a reason to buy.
Beginner takeaway
A strong property-level return does not automatically mean strong leveraged cash flow — financing decides how much of the NOI the investor keeps.
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.
Fictional example for education only. Results depend entirely on the assumptions shown and are not investment, lending, tax, or legal advice.