Every week, we run a real deal through Freehold Acquire's underwriting engine — the same tool that institutional buyers use to evaluate hundreds of properties per week. We publish the full analysis so you can see exactly how the math works and what separates a strong deal from a weak one.
This week: a 1978 six-unit multifamily in Portland's Kerns neighborhood, listed at $985,000.
The Property at a Glance
| Metric | Value | |--------|-------| | Address | 2847 NE Burnside St, Portland, OR | | Units | 6 (all 2BR/1BA) | | Year Built | 1978 | | List Price | $985,000 | | Price Per Unit | $164,167 | | Current Gross Rent | $8,400/mo ($1,400/unit) | | Market Median Rent | $1,595/mo (2BR, Portland) |
This is a classic value-add play. The current owner has held for 14 years and hasn't pushed rents. At $1,400/unit, these units are sitting 12.2% below the Portland 2BR median — and roughly 22% below top-quartile rents for similar vintage multifamily in inner Southeast.
The Numbers: Income & Expenses
Current Income
Gross monthly rent comes in at $8,400, or $100,800 annually. With a 5% vacancy reserve (conservative for this submarket — Kerns has historically run below 4%), effective gross income is $95,760.
Operating Expenses
Here's where this deal gets interesting. The current owner self-manages and hasn't invested in capital improvements, so the expense structure is lean but deferred:
| Expense | Monthly | Annual | % of Gross | |---------|---------|--------|------------| | Property Tax | $1,025 | $12,300 | 12.2% | | Insurance | $390 | $4,680 | 4.6% | | Maintenance & Repairs | $650 | $7,800 | 7.7% | | CapEx Reserve | $300 | $3,600 | 3.6% | | Utilities (common area) | $180 | $2,160 | 2.1% | | Admin & Legal | $100 | $1,200 | 1.2% | | Total Expenses | $2,645 | $31,740 | 31.5% |
Note what's missing: no management fee. The current owner self-manages. If you plan to self-manage, that's fine — but you need to model the cost of your time. At 8% of gross ($672/mo), total expenses climb to $39,804/year, and your NOI margin drops from 63.5% to 55.5%.
Net Operating Income
- Self-managed NOI: $64,020/year (63.5% margin)
- Professionally managed NOI: $55,956/year (55.5% margin)
Both numbers are healthy. An NOI margin above 55% puts this property in the top quartile for small multifamily in Portland. The institutional benchmark for stabilized multifamily is 55–65%, so even with professional management, this deal is competitive.
Debt Service & Cash Flow
We modeled this at 75% LTV with a 6.85% fixed rate on a 30-year term:
| Metric | Value | |--------|-------| | Down Payment | $246,250 (25%) | | Loan Amount | $738,750 | | Monthly Payment | $4,839 | | Annual Debt Service | $58,068 |
Cash Flow (Self-Managed)
- Annual NOI: $64,020
- Annual Debt Service: $58,068
- Annual Cash Flow: $5,952
- Monthly Cash Flow: $496/mo
- Cash-on-Cash Return: 2.4%
- DSCR: 1.10x
That cash-on-cash looks thin. But here's the thing — this is the current state, before rent adjustments. The deal thesis isn't about buying and holding at current rents. It's about closing the rent gap.
The Value-Add Thesis
Here's what makes this an 82/100 deal instead of a 60.
Rent Gap Opportunity
Current rent: $1,400/unit. Portland 2BR median: $1,595. Top quartile for comparable vintage multifamily in Kerns: $1,725.
If you bring rents to market median ($1,595) over 12–18 months through natural turnover and modest unit improvements ($3,000–$5,000 per unit in cosmetic upgrades — new fixtures, LVP flooring, fresh paint), the income picture changes substantially:
| Scenario | Monthly Gross | Annual NOI (Managed) | Cash-on-Cash | DSCR | |----------|--------------|---------------------|--------------|------| | Current ($1,400/unit) | $8,400 | $55,956 | 2.4% | 1.10x | | Market Median ($1,595/unit) | $9,570 | $68,586 | 4.3% | 1.18x | | Top Quartile ($1,725/unit) | $10,350 | $75,678 | 7.2% | 1.30x |
At top-quartile rents — achievable with $20,000–$30,000 in total unit improvements — this property generates $17,610 in annual cash flow on a $246,250 down payment. That's a 7.2% cash-on-cash return with a 1.30x DSCR.
CapEx Considerations
The 1978 vintage means you need to budget for:
- Roof: Likely 5–8 years remaining. Budget $35,000–$45,000 for replacement.
- Plumbing: Galvanized pipes common in this era. Inspection is essential before close.
- Electrical: 100-amp panels are standard for this vintage. Adequate for residential, but verify.
- Windows: Single-pane originals are common. Budget $800–$1,200/window for energy-efficient replacements.
None of these are deal-killers, but they need to be in your 5-year capital plan. Freehold Acquire's sensitivity analysis flagged the roof and plumbing as the two biggest risk factors pulling the Freehold Score down from the low 90s.
Sensitivity Analysis
We stress-tested this deal across three scenarios:
Interest Rate Sensitivity
A 1% rate increase (6.85% → 7.85%) would push monthly debt service to $5,317, cutting annual cash flow at market rents from $10,518 to $4,782. The deal still cash-flows positive but becomes rate-sensitive. The current rate environment (mid-6s for DSCR loans on small multifamily) is favorable.
Vacancy Sensitivity
Moving from 5% to 10% vacancy (losing one unit for ~6 weeks/year) reduces NOI by $4,785 annually. At market rents with 10% vacancy, the deal still generates positive cash flow of $5,733/year. Portland's historically tight rental market in inner neighborhoods gives this some cushion.
Rent Growth Sensitivity
Portland's 10-year CAGR for multifamily rents is approximately 3.8%. Even if rent growth slows to 2% over the next 5 years, this property's below-market starting point gives you a built-in growth runway that's independent of market-level appreciation.
Freehold Score Breakdown: 82/100
| Sub-Score | Points | Out Of | |-----------|--------|--------| | Cash Flow Strength | 23 | 30 | | Market Positioning | 21 | 25 | | Risk Profile | 20 | 25 | | Growth Potential | 18 | 20 |
Cash Flow Strength (23/30): Current cash flow is thin, but the clear rent gap and low expense ratio create strong post-stabilization cash flow. Dinged for the current-state DSCR being at 1.10x.
Market Positioning (21/25): Portland's Kerns neighborhood is one of the strongest rental submarkets in the metro. Walk score, transit access, and proximity to employment centers are all above average. The 12% rent gap confirms the property is underpositioned relative to comparable inventory.
Risk Profile (20/25): The 1978 vintage introduces capital expenditure uncertainty. Plumbing and roof concerns, while manageable, reduce the risk score from what would otherwise be mid-20s. The deal also carries moderate interest rate sensitivity.
Growth Potential (18/20): The combination of below-market rents, a strong submarket, and Portland's supply-constrained zoning environment makes this a high-conviction growth play. Nearly full marks.
The Verdict
This is a textbook value-add opportunity for an operator who's comfortable with light renovation and active rent management. The current numbers are thin, but the gap between current and market rents is wide enough to create meaningful cash flow improvement within 12–18 months.
If you're looking for a stabilized, hands-off cash flow play, this isn't it. If you're looking for a deal where the upside is clearly visible and achievable with modest capital investment, this is exactly the kind of property that separates active operators from passive holders.
Freehold Score: 82/100 — Strong Buy for active operators.
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