Fictional case study
Sunset Street Duplex
1420 Sunset Street, Madison, WI — 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 how rent, operating expenses, and financing combine to determine actual cash flow.
Sunset Street is a straightforward small rental designed to help you connect rent, expenses, NOI, and cash flow.
Property overview
- Property type
- Duplex
- Units
- 2
- Fictional address
- 1420 Sunset Street, Madison, WI — Fictional
- Learning focus
- Rent to NOI to cash flow
Purchase and financing assumptions
- Purchase price
- $310,000
- Down payment
- 30% ($93,000)
- Loan amount
- $217,000
- Interest rate
- 6.25%
- Loan term
- 30 years
- Amortization
- 30 years
Income assumptions
- Unit 1 — 2 bed / 1 bath, upper unit$1,450 / mo
- Unit 2 — 2 bed / 1 bath, lower unit$1,350 / mo
- Monthly base rent
- $2,800
- Monthly other income
- $100
- Annual gross potential income
- $34,800
- Vacancy
- 5%
- Credit loss
- 1%
- Effective gross income
- $32,712
Expense assumptions
- Property taxes$4,500
- Insurance$1,450
- Repairs and maintenance$1,250
- Property management$2,300
- Utilities$700
- Landscaping and snow removal$540
- Licensing and permits$120
- Reserves / CapEx$900
- Annual operating expenses
- $11,760
- Expense ratio
- 35.95%
- Annual NOI
- $20,952
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
- $93,000
- Closing costs
- $7,000
- Initial repairs
- $4,000
- Total cash required
- $104,000
Calculated results
Calculated with the shared PropertyU financial engine from the assumptions above.
- Gross potential income
- $34,800
- Effective gross income
- $32,712
- Annual NOI
- $20,952
- Monthly mortgage payment
- $1,336.11
- Annual debt service
- $16,033.28
- Annual cash flow
- $4,918.72
- Monthly cash flow
- $409.89
- Cap rate
- 6.76%
- Cash-on-cash return
- 4.73%
- DSCR
- 1.31
- LTV
- 70.00%
- Break-even occupancy
- 79.87%
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%
- Selling costs
- 6% of sale price
Strengths
- Two units, so one vacancy does not remove all income
- Operating expenses are modest for a well-kept duplex
- Positive monthly cash flow with a comfortable debt coverage cushion
Risks
- A 30% down payment is a large amount of cash for a small property
- Cash-on-cash return is modest relative to the cash invested
- Wisconsin winters add snow removal and heating-season maintenance risk
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 rents are in line with the neighbourhood, expenses are fully itemised, and debt coverage leaves room for a vacancy. The weakness is the return on the cash invested, not the property itself, so this is a reasonable buy for an investor who wants a simple, stable first rental.
The highest cap rate is not automatically a buy, and positive cash flow alone is not a reason to buy.
Beginner takeaway
Positive cash flow does not automatically mean a great deal — always compare the cash flow to the cash invested.
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.