Denver, CO 80209|Multifamily|4 units|Built 1955|3,100 sq ft
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The location is premium but the numbers are thin at asking price. Below-market cap rate and tight debt coverage leave almost no margin for unexpected vacancy or repairs. This deal becomes attractive at $740K–$760K — present a data-backed counter offer.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Gross Rent | $81,600 | $84,048 | $86,569 | $89,167 | $91,842 |
| Vacancy Loss (5%) | ($4,080) | ($4,202) | ($4,328) | ($4,458) | ($4,592) |
| Effective Gross Income | $77,520 | $79,846 | $82,241 | $84,708 | $87,249 |
| Operating Expenses | ($19,584) | ($19,976) | ($20,375) | ($20,783) | ($21,198) |
| NOI | $57,936 | $59,870 | $61,866 | $63,925 | $66,051 |
| Debt Service | ($47,856) | ($47,856) | ($47,856) | ($47,856) | ($47,856) |
| Cash Flow | $10,080 | $12,014 | $14,010 | $16,069 | $18,195 |
| Cash-on-Cash Return | 4.9% | 5.9% | 6.8% | 7.8% | 8.9% |
| Estimated Equity | $221,400 | $238,128 | $255,191 | $272,594 | $290,346 |
Assumes 3% annual rent growth, 2% annual expense growth, 5% vacancy reserve, 2% annual appreciation.
Washington Park is one of Denver's most desirable residential neighborhoods — and that premium is fully priced in. Low vacancy and strong tenant quality are offset by elevated price-per-unit ratios that compress returns. Appreciation potential is real but cash flow is tight. This is a wealth-preservation play, not a cash flow play.
At asking price, this property adds minimal IRR lift (+0.2%) to a 3-property portfolio. The tight DSCR (1.08x) introduces debt service risk that could drag blended portfolio Freehold Scores. At a negotiated price of $740K, IRR lift improves to +0.5% with acceptable risk parameters.
See full portfolio impact analysis with Freehold OwnBelow-market cap rate and 25% vacancy are the primary concerns. This deal works at $740K with stabilized occupancy — consider offering $80K below asking with a vacancy contingency.
At 1.08x DSCR, one more vacancy pushes you below breakeven. Negotiate seller financing or a rate buydown to improve debt coverage.
Washington Park commands premium rents but your units are at market. A light cosmetic renovation ($5K/unit) could push rents 8–12% above current levels.