Purchase price in relation to current rents

[Nicholas Kitchen]

I am looking at a 10 unit property that is listed for $350k, being advertised as a 10% CAP.

I had the listing broker send me a T12 and actual expenses. He also sent me a pro forma. The pro forma has annual gross income of $48k (rents at $400 each) with $12k expenses (including property management), so an NOI of about $36k. Okay that's cool. But looking at the actual T12, the monthly rents show $2390 a month with 3 vacancies.

My question is ... well, for one, this seems like somebody trying to pull a fast one ... do you put in an offer based on the current rent with the 3 vacancies? If so, it seems as if the property should really be valued closer to $170k.

I'd like to know your thoughts.

Thanks in advance!