MULTIFAMILY INVESTMENT CASE STUDY
What Todd Saw in the Six-Unit Property Other Investors Avoided
Outdated kitchens and swamp coolers discouraged other investors. Todd saw recently replaced major systems and a way to test the renovation strategy on one unit before committing to the entire building.
$1.25M
Acquisition and improvement basis
≈19%
Achieved rent increase
$72,996
Year-one NOI
$39,847
Year-one cash flow after debt service
$153,769
Modeled value creation
Modeled value is a capitalization-based estimate, not an appraisal, sale price, or guaranteed market value. Current rents have been stabilized; additional rental upside has not yet been established.
Why he was looking at all
A Legacy Play, Not Just Another Acquisition
The client already owned a substantial portfolio concentrated in financial markets and wasn’t sure he had the time left to wait out a prolonged downturn. He wanted a legacy asset his children could operate and keep improving — at a moment when capitalization rates were lower than when he’d bought before, raising real doubts about whether another acquisition could still pencil.
Several six-unit properties looked more finished in listing photos. After review, none offered a clear value-creation plan — this one did, despite looking worse on paper.
Visible disadvantages
- — No central air — swamp coolers in each unit
- — 1970s kitchens, no dishwashers, no in-unit laundry
- — Outdated cabinets, countertops, sinks, lighting, and hardware
Positive fundamentals
- — Roof ≈1 year old; all six furnaces ≈2 years old
- — New carpet and updated bathrooms already in place
“The property was old. Many of its most expensive components were not.”
The roof, furnaces, carpet, and bathrooms — the items that usually blow up an older property’s numbers after closing — had already been replaced. That didn’t eliminate future repairs or turnover, but it meant the remaining, visible deficiencies were correctable within a defined budget rather than a surprise expense.
Testing before scaling
One Renovated Unit, Before Committing to All Six
The original plan was to add air conditioning to every unit and introduce a modest rent increase at each lease renewal — not a full renovation all at once. To find out whether a complete renovation package was worth the cost, Todd had the owners fully renovate one unit first — new cabinets, quartz counters, a dishwasher, updated lighting and hardware, and in-unit laundry — market it, and watch what happened.
The response was strong enough that the owners moved up the timeline and renovated the remaining five sooner than planned. Some existing tenants did choose to leave rather than pay the higher renewal rent — a real cost in vacancy, turnover, and leasing time, not something to wave away — but the renovated unit’s reception gave the owners confidence the improved apartments would find new renters.
“They didn’t renovate all six units on hope. They tested one first.”
Todd recommended the one-unit market test; the owners approved and funded it; actual renter response supported the decision to proceed. The test reduced uncertainty — it didn’t eliminate investment or vacancy risk.
- 01
Improve every unit with air conditioning
A property-wide improvement introduced before any full interior renovation.
- 02
Plan modest rent adjustments at renewal
Introduced at each tenant's normal lease-renewal date, not imposed mid-lease.
- 03
Fully renovate one test unit
Kitchen, countertops, sink, dishwasher, lighting, hardware, and in-unit laundry.
- 04
Measure renter response
Observe actual inquiries and interest before committing further capital.
- 05
Accelerate the remaining renovations
Move up the timeline once renter response supports it.
- 06
Stabilize rents
Bring renovated units to a supportable, achieved rent level.
- 07
Test future market rent through broader exposure
Use professional marketing on future vacancies to find the property's real ceiling.
Historical, achieved figures
The Numbers, As They Stand Today
Operating results
- Achieved rent increase: ≈19%
- Year-one NOI: $72,996
- Cap rate on cost: 5.8%
- Cash flow after debt service: $39,847
- Cash-on-cash return: ≈4.8%
- Renovation program cost: < ≈$100,000
Capital structure
- Acquisition and improvements: $1,250,000
- Base acquisition loan: ≈$412,500
- Closing costs financed into the loan: ≈$8,000
- Initial loan balance: ≈$420,500
- Cash invested: ≈$837,500
- Year-one principal reduction: ≈$4,375
- Year-one ending loan balance: $416,125
- Capital structure: ≈67% invested equity, 33% financing
The clients didn’t want to maximize leverage — this structure captured some benefit from financing while limiting debt-service pressure and preserving flexibility for vacancies, repairs, or turnover.
Historical figures above are achieved results, not projections. Current rents are not necessarily the market’s ceiling — more on that below — and future turnover isn’t guaranteed to be this manageable.
For the numbers-focused reader
The Full Modeled-Return Breakdown
Everything above is achieved and historical. Everything below is modeled or projected — expand for the full math and every disclaimer that goes with it.
How was the $153,769 in modeled value calculated?
- Acquisition and improvement basis: $1,250,000
- Year-one NOI: $72,996
- Illustrative market cap rate: ≈5.2%
- Modeled property value: $1,403,769
- Modeled value above basis: $153,769
This is a capitalization-based estimate — not an appraisal, sale price, or guaranteed market value — and it does not include the unproven rental upside described later on this page.
What's the full modeled combined return, year by year?
| Cash flow | $39,847 |
| Modeled property-value increase | $153,769 |
| Principal reduction | $4,375 |
| Illustrative depreciation-related tax savings | $9,545 |
| Total modeled first-year return | $207,537 |
| Modeled Combined Return on Invested Cash | 24.8% |
The 24.8% figure is not a 24.8% cash yield. Actual cash-on-cash return was ≈4.8%. The rest is unrealized modeled value creation, principal reduction (not spendable cash), and illustrative, client-specific tax savings.
After the initial repositioning year
≈10.0%
Year 2
≈10.3%
Year 3
≈10.6%
Year 4
≈10.9%
Year 5
Projections, not guaranteed returns — includes cash flow, principal reduction, modeled appreciation, and illustrative tax benefits, and does not include any unproven rental upside beyond what’s already in this model.
Downside scenario: Rent declines by 20%; Vacancy increases by 10 percentage points; Financing assumptions remain unchanged
Modeled annual cash flow under this combined scenario: $14,647 — still positive, supporting the clients’ goal of preserving income capacity in a difficult environment.
Actual results could differ because of rents, vacancy, repairs, expenses, tenant turnover, financing, and market conditions.
Where it goes from here
Stabilized Rents Aren't the Ceiling
The ≈19% rent increase stabilized the property, but the owners haven’t concluded that’s the market’s ceiling — the units haven’t been marketed with full professional exposure yet. Next up: professional photography, broader platform exposure, and tracking inquiry volume, applicant quality, and time-to-lease as units turn over, to find the real number.
The owners also planned to self-manage. Todd helped them set up inexpensive property-management software to automate rent collection, digital leases, and routine paperwork — not to replace them, but to free up their time for the decisions that actually matter: tenant relationships, maintenance, and leasing strategy.
“The property has been improved and stabilized, but the market hasn’t yet fully tested what the renovated units may command.”
Summary
What Todd Saw
- Major capital items were already replaced, reducing near-term exposure
- The remaining deficiencies were correctable, not disqualifying
- Property-wide A/C could roll out without renovating every unit at once
- One renovated unit could serve as a real market test, not a guess
- Strong renter response justified accelerating the rest
- Some turnover was real — and worth the risk once demand was proven
- Moderate leverage traded some upside for real resilience
- Self-management stayed practical with the right automation
- Stabilized rents are a floor, not proof of the ceiling
Todd’s role wasn’t just to locate a six-unit property — it was to connect a legacy goal with capital-expense analysis, staged risk, real market testing, and a financing structure built to survive a bad year, not just a good one. None of this guarantees the same outcome elsewhere. It’s what disciplined pricing and real testing looked like on this one.
Read the full disclosures
- — This example concerns a specific client, property, financing structure, improvement program, and market environment.
- — Results vary.
- — Modeled property values are not appraisals or guaranteed sale prices.
- — Projected returns are not guaranteed.
- — Modeled value increases are unrealized until a sale or refinance occurs.
- — Current rents have been stabilized but may not represent maximum market rent.
- — Future rental upside has not yet been established.
- — Strong renter interest in one unit does not guarantee identical future demand.
- — Tenant turnover may create vacancy, repair, leasing, and administrative costs.
- — Tax calculations are illustrative and depend on the owner's circumstances.
- — Depreciation, passive-loss limitations, interest deductions, depreciation recapture, and other tax issues should be reviewed with a CPA.
- — Real-estate investments involve risk, including vacancy, repairs, declining rents, financing risk, tenant turnover, and changes in property value.
- — Todd provides real-estate brokerage and property-analysis services, not legal, tax, securities, or investment-advisory services.
Author: Todd McClean, Realtor® | Real Estate Investment Strategist, Mountainland Realty, Inc.. Reviewed July 21, 2026. This page provides general real estate investment information and is not legal, tax, accounting, lending, securities, commodities, or financial-planning advice.
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Real-estate investments involve risk, including vacancy, repairs, declining rents, financing risk, tenant turnover, and changes in property value. Todd provides real-estate brokerage and property-analysis services, not legal, tax, securities, or investment-advisory services.