5 unit valuation question

[Erik Pfundstein]

Am i in the ballpark on valuating this property?: 5 unit C class building in a C neighborhood. List price is 280k. They are currently renting below market, total rents 3400. They are very mom/pop style and couldnt really give any specifics on other expenses besides electric 30, taxes 270, water 250, so i estimated vacancy, repairs, cap ex, management, insurance, etc. NOI at their current rents is around 11-12k. I believe the local cap rate is around 8%-10% for this type of property. Even if i am being overly cautious on vacancy repairs etc (10%) i think im getting around 150k valuation due to owner charging well below market rents. Rents could be increased to 4000k without any addtl work on the property which you could estimate property value would be 230k with increased rents. Also, Ive seen some 6 units sell for 220-230k in the area in the fall. Do these numbers make sense? Doubt they would bite on 150-180k offer

[Karl B.]

Especially if the property has been on the market for a while, lowball them. They'll either say yes, no, or will counter, and their counter could be something you're able to work with. 

Unless there's major appreciation, there's no way I'd pay 280K based on the increased monthly rent of $4000.