Basing CAP rate off projected income
Hey all,
So I was looking at a 10-unit multi-family property the other day online and it was advertising an 8 CAP. But when I ran the numbers, the CAP rate I got was closer to 6. When I asked the broker where the 8 CAP came from, she said it was based off projected NOI.
I’ve always evaluated any property or business off actuals, not projected. Is calculating CAP rate off projected NOI an accepted practice in commercial RE? If not, would this be a good point to negotiate a lower purchase price or would I just be spinning my wheels?