I am new to analyzing properties and keep noticing something that I am not sure how to understand. Here is an example below. No intention on buying it, its just for example purpose for analysis training.

18 Unit Condo

St Petersburg, FL

Asking: $2,400,000

T12 Rental Income: $215,040 (Yes I know the 1% rule)

T12 Expenses: $135,942 (Did not adjust for more tax liability after purchase)

Net Income: $79,098

Now if I were to put 600K down and service 1.8MM in Debt at 4% then

Mortgage Service: $103,121.70 Yearly

Net Income -$24,023 so obviously Negative COCROI

If instead it was purchased with Cash and netted the $79,098 then my COCROI would still only be 3.3% with a LOT of capital tied up.

So now on to the questions. 

1) The Proforma claims "Rent Potential" of an extra 100K when you raise rents to market levels (which would then be a 7.5% return). Tenants are currently MTM. Are they asking a sales price based on what you will supposedly earn later? I see a LOT of places seeming to do this. Seems silly to me to price in a rent raise that has not happened. They are just asking you to take some crazy risk to get ANY return?

2) Are deals like these done on debt often or are they usually looking for the guy that only wants 5-6% after paying Cash? Like a big Fund? (Which this deal would still be bad for and also small). IE, would your advice be that if you cant do it on Leverage then its not a good enough deal?

3) Do you try to make the deal work for you based on the T12 and ignore the supposed future increases that are being displayed in the Proforma? For example, this deal would work for me at 8% at $1,200,000 as it stands which is only 50% what they are asking. Would you offer what works for you on every place you look at and see which ones bite? Maybe with a letter of Intent?

4) What tools do you use to research the marketplace for rentals? You can look at rentals on Zillow and Craigslist but how do you know what people are asking vs actually getting? Post fake ads and count the replies? Obviously I don't want to do it that way and am just curious on your strategy for analyzing the rental market as a whole in the immediate area so you can build a proforma you trust.

I know the deal is terrible (unless there is some huge appreciation in St. Petersburg FL and future value is priced in now which I did not look into). What I am trying to find is what I am missing for analysis purposes for what is market competitive. For example, if most buyers of the more expensive multi family homes such as in the 5MM-10MM range are paying cash then I am already at a disadvantage buying with debt and will have to look much harder for deals. Are deals that you can buy on Debt with an 8% return reasonable to expect after looking at a few hundred or are they more like unicorn deals and you have to get super creative or an in with a great broker.

Thanks to everybody in advance for responding.