Investing in multifamily or commercial property is the offer based on current rents?

[Isaac J Mork]

When investing in commercial property? Would you pay based on what its producing today or what you think the current rents should be?

Like current NOI / 7% cap rate = offer?
Or are you taking on the risk of raising rents to get the property where you think it should be.

[Ash Patel]

I have been doing this for over 10 years.  You never speculate and hope for the best.  Thats what got a lot of Multifamily people in trouble.  If there is vacancy, you try to lease it up duing DD.  If rents are below market and the tenant is not locked into a long term lease, you do a tenant interview during DD and guage the likelihood of them accepting a rent increase.  Also look at surrounding vacancy and lease comps.