Cap rates?

[Michelle Marty]

I've been negotiating back and forth with a seller. They have a 4 unit building that has been on the market for over a year simply because the price is too high. I knew it was a long shot but I put in an offer 25% less than asking ($150 on a building priced at 199). They responded that they were very eager to sell but then came back with a counter 5% less than asking (190). They used examples of other properties selling for that price but neglected to realize their "comps" were all new construction and renting for 300 more per unit. Their building is 30 years old and will need a little work. The cap rate would be 4% at their price. I know it's time to walk away from this deal. But what I'm wondering is how do you guys and gals evalutate a deal? Do you use the cap rate and if so do you have a min. rate that you will accept?