Pricing An Apartment?

[Tariq B.]

Recently I have bounced around the idea of bumping up to the next bracket...apartment complex investing. I am seeing quite a few do this practice of what seems "padding the numbers". I have noticed that in order to justify their asking price they are using numbers of what the property could "potentially" bring in, as in fix it up here and there, raise rents, and fill in occupancy.

It was my understanding that when you figure out the cost on commercial property using a cap rate you don't do the math with what it COULD be making you do the math on what it is making now. Am I wrong? I see a lot quite a few 50% occupancy, listing price as if it was 90-100% occupancy.

Has anyone noticed that or gone into negotiations with an inflated sell price? Thanks!

Tariq