Fictional case study
Tuscaloosa Student Rental — High Occupancy Risk
800 Crimson Avenue, Tuscaloosa, AL — Fictional
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
- Single-family student rental
- Units
- 1
- Fictional address
- 800 Crimson Avenue, Tuscaloosa, AL — Fictional
- Learning focus
- Negative cash flow
Purchase and financing assumptions
- Purchase price
- $350,000
- Down payment
- 25% ($87,500)
- Loan amount
- $262,500
- Interest rate
- 7.25%
- Loan term
- 30 years
- Amortization
- 30 years
Income assumptions
- Monthly base rent
- $3,200
- Monthly other income
- $0
- Annual gross potential income
- $38,400
- Vacancy
- 8%
- Credit loss
- 2%
- Effective gross income
- $34,560
Expense assumptions
- Property taxes$3,800
- Insurance$1,900
- Repairs and maintenance$2,200
- Property management$3,600
- Utilities$1,400
- Landscaping and snow removal$900
- Trash$420
- Licensing and permits$280
- Reserves / CapEx$1,000
- Pest control$500
- Annual operating expenses
- $16,000
- Expense ratio
- 46.30%
- Annual NOI
- $18,560
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
- $87,500
- Closing costs
- $8,500
- Initial repairs
- $5,000
- Total cash required
- $101,000
Calculated results
Calculated with the shared PropertyU financial engine from the assumptions above.
- Gross potential income
- $38,400
- Effective gross income
- $34,560
- Annual NOI
- $18,560
- Monthly mortgage payment
- $1,790.71
- Annual debt service
- $21,488.55
- Annual cash flow
- -$2,928.55
- Monthly cash flow
- -$244.05
- Cap rate
- 5.30%
- Cash-on-cash return
- -2.90%
- DSCR
- 0.86
- LTV
- 75.00%
- Break-even occupancy
- 97.63%
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
- Larger down payment lowers the loan amount
- Student housing may have concentrated seasonal demand
- Relatively limited repair budget
Risks
- Negative projected cash flow
- DSCR below 1.00
- Break-even occupancy is very high
- Leasing season and tenant turnover could create added 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
Beginner takeaway
A larger down payment does not automatically make a property profitable.
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.