Investment Overview

The Flats at Gum Drive presents a compelling value-add multifamily investment opportunity in Portsmouth's rapidly transforming waterfront corridor. This 16-unit garden-style apartment community at 3593-3607 Gum Drive comprises three two-story buildings totaling 9,600 square feet on 0.75 acres. Originally constructed in 1972 and renovated in 1982, the property features attractive brick exteriors, functional floor plans, and recent interior upgrades positioning it to capture immediate rent growth in one of Hampton Roads' most strategically located submarkets.

Property Configuration & Recent Improvements

The Flats at Gum Drive features a balanced unit mix appealing to Portsmouth's diverse renter demographic, including military personnel, healthcare workers, shipyard employees, and young professionals seeking affordable housing near major employment centers.

Unit Mix:

• 8 One-Bedroom, One-Bathroom Units (500 SF average)
  • Current average rent: $978/month ($1.96/SF)
  • Market potential: $1,200/month ($2.40/SF)
  • Upside opportunity: 23% rent increase
• 8 Two-Bedroom, Two-Bathroom Units (700 SF average)
  • Current average rent: $1,099/month ($1.57/SF)
  • Market potential: $1,250/month ($1.79/SF)
  • Upside opportunity: 14% rent increase

Recent Capital Improvements:The property showcases significant owner investment in interior renovations creating immediate competitive advantage:

• Modern kitchens with maple cabinetry, granite-style countertops, and stainless-steel appliances
• Luxury vinyl plank flooring throughout living areas
• Updated bathrooms with contemporary fixtures and finishes
• Fresh interior paint and modern lighting packages
• Energy-efficient windows reducing utility costs

These improvements enable the property to command near-market rents with minimal additional capital requirements, differentiating it from competing older inventory requiring substantial renovation investment.

Immediate Rent Growth Opportunity

The Flats at Gum Drive demonstrates 15% organic rent growth potential with current portfolio-wide average rents of $1,038 per month positioned below the $1,157-$1,225 market range. This loss-to-lease opportunity reflects conservative in-place pricing rather than deferred maintenance or competitive disadvantage, creating a clear path to NOI expansion through systematic rent adjustments during lease renewals.

Market Rent Analysis:Comparable Portsmouth properties command:

• One-bedroom units: $995/month at nearby 310 Navajo Trail (120 units)
• Two-bedroom units: $1,100-$1,307/month across multiple comps
• Average two-bedroom rent: $1,157/month across six comparable properties

With recent renovations already complete, The Flats at Gum Drive can capture these market rents immediately through strategic pricing adjustments, lease-renewal negotiation, and targeted marketing emphasizing the property's superior condition and convenient location.

Strategic Portsmouth Location

The Flats at Gum Drive occupies a prime position in Portsmouth's Churchland neighborhood, providing residents with exceptional access to the region's largest employment centers while maintaining an attractive residential setting with mature landscaping and ample surface parking.

Superior Connectivity:

• I-264 & I-464: Minutes to major interstate access serving entire Hampton Roads
• Norfolk Naval Shipyard: 5-7 minutes (major regional employer)
• Naval Station Norfolk: 15 minutes via I-264
• Maryview Medical Center: 8 minutes
• Portsmouth City Center: 10 minutes
• Norfolk International Airport: 15 minutes
• Downtown Norfolk: 18 minutes via Midtown Tunnel

Neighborhood Amenities:

• Retail & Dining: Numerous shopping centers, grocery stores, and restaurants along High Street and Portsmouth Boulevard
• Healthcare: Bon Secours Maryview Medical Center and affiliated medical offices
• Education: Portsmouth Public Schools serve the area; Tidewater Community College nearby
• Recreation: Elizabeth River waterfront access, Hoffler Creek Wildlife Preserve, City Park
• Entertainment: Rivers Casino Portsmouth (5 minutes), Port of Virginia attractions

This central location between Portsmouth's employment hubs and residential neighborhoods creates consistent rental demand from workers seeking convenient commutes and access to urban amenities at affordable price points.

Military & Naval Shipyard Housing Demand

Portsmouth's rental market benefits from unparalleled employment stability driven by Norfolk Naval Shipyard—one of the nation's oldest and largest naval facilities, employing thousands of civilian and military personnel requiring nearby housing.

Norfolk Naval Shipyard (NNSY):Located immediately adjacent to Portsmouth, NNSY serves as a primary maintenance, repair, and overhaul facility for the U.S. Navy's Atlantic Fleet, including aircraft carriers, submarines, destroyers, and support vessels. The shipyard's critical national defense mission ensures:

• Stable Employment: Thousands of skilled civilian workers plus military personnel
• Consistent Housing Demand: Regular workforce rotations and long-term career employees
• Competitive Wages: Well-compensated positions supporting market-rate rents
• Economic Resilience: Federal funding insulates the regional economy from private sector volatility

The Flats at Gum Drive's proximity to NNSY positions it as a preferred housing option for shipyard employees seeking minimal commute times while avoiding Norfolk's higher rental costs.

Broader Military Presence:Beyond NNSY, Hampton Roads hosts Naval Station Norfolk (world's largest naval base), Joint Base Langley-Eustis, and numerous other defense installations creating sustained demand for affordable rental housing. Military families and personnel consistently seek:

• Convenient base access via I-264/I-464
• Affordable rents within BAH allowances
• Safe, well-maintained communities
• Flexible lease terms accommodating military rotations

Economic Diversification & Growth

While defense dominates Portsmouth's economy, the city benefits from diversification across healthcare, education, maritime commerce, and emerging entertainment sectors providing year-round employment stability.

Major Portsmouth Employers:

• Bon Secours Health System: Regional healthcare leader with Maryview Medical Center
• Portsmouth Public Schools: Significant public sector employer
• Norfolk Naval Shipyard: Primary economic driver (federal government)
• U.S. Department of Homeland Security: Regional operations center
• Naval Medical Center Portsmouth: Military healthcare facility
• Virginia International Gateway: Major Port of Virginia container terminal
• Tidewater Community College: Educational institution with Portsmouth campus
• Rivers Casino Portsmouth: Entertainment and hospitality (340+ jobs created)

This employment diversity supports rental demand across demographic segments, reducing dependence on any single industry or employer.

Hampton Roads Transformation & Infrastructure Investment

The Hampton Roads region is experiencing unprecedented development activity with over $5 billion in committed infrastructure, entertainment, and commercial projects enhancing connectivity, economic competitiveness, and quality of life—all supporting residential property values and rental demand.

Hampton Roads Bridge-Tunnel Expansion ($3.9B):Scheduled for Spring 2027 completion, this transformative project will add capacity and reduce commute times between Portsmouth/Norfolk and the Virginia Peninsula, expanding employment access for Portsmouth residents and making the city increasingly attractive to Peninsula workers seeking more affordable housing.

Rivers Casino Portsmouth ($340M):Opened January 2023, Rivers Casino has rapidly become a regional entertainment destination with:

• 1,300+ slot machines and 50+ table games
• Multiple restaurants and bars
• Live entertainment venue
• Over 340 permanent jobs created
• Significant tourism and hospitality spending catalyst

The casino's success demonstrates Portsmouth's capacity to attract major commercial investment, signaling broader revitalization momentum supporting residential property appreciation.

Atlantic Park Virginia Beach ($350M):The Pharrell Williams-backed mixed-use development featuring a 2.67-acre surf park, dining, entertainment, retail, and residential components will drive regional tourism growth and spending power benefiting entire Hampton Roads, including Portsmouth's residential rental market.

Norfolk International Airport Expansion ($1.0B):Comprehensive modernization including new customs facility, concourse expansion, consolidated rental car center, and on-site hotel (completion 2026-2027) will enhance regional connectivity and economic development, supporting population growth and housing demand.

Financial Performance & Value Proposition

• Asking Price: $1,845,500
• Price per Unit: $115,344
• Price per SF: $192.24
• Year Built / Renovated: 1972 / 1982
• Total Units: 16 (8 one-bedroom, 8 two-bedroom)
• Current NOI: $129,188
• Stabilized NOI: $160,286
• Current Cap Rate: 7.00%
• Stabilized Cap Rate: 8.69%
• Current Occupancy: 93.59%

Exceptional Return Metrics

The Flats at Gum Drive offers superior risk-adjusted returns driven by below-market in-place rents, recent capital improvements eliminating major repositioning costs, and strong Hampton Roads market fundamentals.

Stabilized Performance (6% Vacancy):

• Gross Potential Rent: $237,552
• Effective Gross Income: $245,980 (including utility reimbursements)
• Operating Expenses: $85,694 (34.8% of EGI)
• Net Operating Income: $160,286
• Cap Rate: 8.69%

Based on 70% LTV financing at 6.25% interest with 30-year amortization:

• Loan Amount: $1,291,850
• Down Payment: $553,650
• Annual Debt Service: $95,450
• Cash-on-Cash Return: 11.71%
• Debt Coverage Ratio: 1.68x
• Annual Cash Flow: $64,836
• Total Return (with debt paydown): 14.62%

Operational Efficiency & Expense Management

Current operating expenses at 36.7% of EGI (34.8% stabilized) demonstrate efficient property management with significant owner-paid utilities being recaptured through tenant billing. Key expense considerations include:

Major Expense Categories:

• Real Estate Taxes: $12,500 current, $23,580 pro forma (reflects recent comparable assessments)
• Insurance: $10,500 (competitive multifamily rates)
• Utilities: Primarily water/sewer with electric being tenant-billed or reimbursed
• Repairs & Maintenance: $9,600 annual budget (controlled by recent renovations)
• Management Fee: 8.0% of EGI (market standard)

The property's recent interior upgrades significantly reduce near-term capital expenditure requirements, allowing new ownership to focus on revenue optimization rather than major renovation projects. Prudent reserves support ongoing preventive maintenance and exterior improvements as needed.

Comparable Sales Validation

Recent Portsmouth multifamily transactions demonstrate strong investor demand and valuation support:

• 1007 Green Street (12 units): $122,201/unit, March 2024
• 424 London Street (4 units): $97,500/unit, April 2024
• 554-556 Broad Street (8 units): $100,000/unit, October 2024
• 259 Broad Street (6 units): $129,167/unit, January 2025
• 201 Dixie Avenue (8 units): $116,875/unit, Pending October 2025

The Flats at Gum Drive's $115,344 per unit pricing aligns perfectly with recent comparable transactions while offering superior NOI growth potential due to loss-to-lease and operational upside, creating exceptional value relative to market alternatives.

Investment Strategy & Value Creation

This property appeals to investors seeking immediate cash flow with clear upside execution:

Year 1-2: Rent Optimization

• Implement strategic pricing adjustments during lease renewals
• Capture 15% organic rent growth to market rates
• Enhance property marketing emphasizing recent renovations
• Target stabilized NOI: $160,286+ (24% increase from current)

Years 2-5: Operational Excellence

• Maintain high occupancy through proactive tenant relations
• Optimize expense management and utility recovery
• Implement annual rent escalations tracking market growth
• Enhance curb appeal through strategic landscaping and exterior improvements

Exit Strategy: Upon stabilization at market rents with demonstrated operational performance, the property will command premium valuation. At an 8.0% cap rate (conservative for stabilized Portsmouth assets near military employment), the property value approaches $2,000,000, representing 8-10% appreciation from purchase price before accounting for NOI growth from continued market rent increases.

Investment Highlights Summary

The Flats at Gum Drive uniquely combines:

1. Immediate Cash Flow: 7.00% in-place cap rate with strong occupancy
2. Organic Rent Growth: 15% upside to market rents with no capital required
3. Recent Renovations: Interior upgrades eliminate major repositioning costs
4. Military Housing Demand: Norfolk Naval Shipyard proximity ensures tenant pipeline
5. Regional Transformation: $5B+ infrastructure investment supporting appreciation
6. Strong Returns: 11.71% stabilized cash-on-cash with 1.68x debt coverage
7. Market-Rate Pricing: $115,344/unit aligns with recent Portsmouth transactions
8. Multiple Exit Strategies: Hold for cash flow or sell post-stabilization

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