Fictional case study
Riverside Triplex
615 Riverside Lane, Austin, TX — 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
Learn to identify assumptions that deserve further investigation.
Every number below is plausible on its own. One of them is doing more work than it should — find it before you decide.
Property overview
- Property type
- Triplex
- Units
- 3
- Fictional address
- 615 Riverside Lane, Austin, TX — Fictional
- Learning focus
- Assumption checking
Purchase and financing assumptions
- Purchase price
- $525,000
- Down payment
- 30% ($157,500)
- Loan amount
- $367,500
- Interest rate
- 6.50%
- Loan term
- 30 years
- Amortization
- 30 years
Income assumptions
- Unit 1 — 2 bed / 1 bath$1,850 / mo
- Unit 2 — 2 bed / 1 bath$1,800 / mo
- Unit 3 — 1 bed / 1 bath, month to month$1,600 / mo
- Monthly base rent
- $5,250
- Monthly other income
- $125
- Annual gross potential income
- $64,500
- Vacancy
- 4%
- Credit loss
- 1%
- Effective gross income
- $61,275
Expense assumptions
- Property taxes$9,800
- Insurance$2,400
- Repairs and maintenance$2,200
- Property management$4,900
- Utilities$1,800
- Landscaping and snow removal$1,100
- Trash$700
- Licensing and permits$260
- Reserves / CapEx$2,100
- Annual operating expenses
- $25,260
- Expense ratio
- 41.22%
- Annual NOI
- $36,015
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
- $157,500
- Closing costs
- $11,000
- Initial repairs
- $7,500
- Total cash required
- $176,000
Calculated results
Calculated with the shared PropertyU financial engine from the assumptions above.
- Gross potential income
- $64,500
- Effective gross income
- $61,275
- Annual NOI
- $36,015
- Monthly mortgage payment
- $2,322.85
- Annual debt service
- $27,874.20
- Annual cash flow
- $8,140.80
- Monthly cash flow
- $678.40
- Cap rate
- 6.86%
- Cash-on-cash return
- 4.63%
- DSCR
- 1.29
- LTV
- 70.00%
- Break-even occupancy
- 82.38%
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
- 6.75%
- Selling costs
- 6% of sale price
Downside scenario
Vacancy at 7% and a normal repair budget
This scenario moves vacancy from 4% to 7% and raises repairs from $2,200 to $4,500 per year — the levels a conservative underwriter would use for a 1970s triplex.
- NOI (base case)
- $36,015
- NOI (downside)
- $31,780
- DSCR (base case)
- 1.29
- DSCR (downside)
- 1.14
- Monthly cash flow (base case)
- $678.40
- Monthly cash flow (downside)
- $325.48
Verify the assumption
Vacancy is modelled at 4% and repairs at about $730 per unit per year on a 1970s triplex. Both are optimistic for Austin; at 7% vacancy and a normal repair budget the cash flow shrinks sharply. Verify the assumption with actual rent history and repair invoices before deciding.
Strengths
- Three units in a strong rental market
- Reported cash flow and debt coverage look comfortable
- One unit is month to month, which allows a faster rent reset
Risks
- The vacancy assumption is below what the market usually supports
- The repair budget is light for the building's age
- Texas property taxes can be reassessed sharply after a sale
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 headline numbers are attractive, but they rest on a 4% vacancy rate and a light repair budget. Re-underwrite at market vacancy and a normal repair allowance, and confirm the post-sale tax assessment, before treating this cash flow as real.
The highest cap rate is not automatically a buy, and positive cash flow alone is not a reason to buy.
Beginner takeaway
Verify the assumption. A deal that only works under optimistic vacancy and repair numbers is not yet a 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.
Fictional example for education only. Results depend entirely on the assumptions shown and are not investment, lending, tax, or legal advice.