Questions to ask when smells too good to be true

[Dan D.]

So i found this listing in Loopnet for an office building at $1.2mil w/ a 26% cap rate.

It's in a pretty good area and 100% leased up.

Talked to the agent and he said it's closing tomorrow; final price $1.05mil and stated the cap rate is accurate (of course I did not believe it so I flat out asked if accurate).

Besides a pro forma; what other docs could I get to substanitate the agent/sellers claims on the cap rate?  Seller tax returns?

Just want to know what I need to be on the look out for as this deal seemed too good to be true and a no brainer.

I am new and can post the link to the property which just closed; but, need to go back and re-read the T&C of this site.  If I cannot and want me to send you the property in a PM i will.

Thx.

[Account Closed]

Originally posted by @Christopher Brainard:

Originally posted by @Account Closed:

Originally posted by @Christopher Brainard:

@Dan D.

Pro Formas are just projections and they are only as good as the person who made it. Before I dropped a cool million, I'm pretty sure I'd want to see the actual income/expense statements. If the building is 100% occupied and has a cap rate of 26%, they should be proud to show you their financials. I suspect, however, that the real cap rate isn't going to come close to 26% and there will be a ton of reasons why.

-Christopher

 Why would you be proud that the market perceives your property as a piece of crap?

 Because I like making money. 

A crappy property that can ONLY command 3.8 times the NOI is NOT gonna make you money! At a more realistic 10% cap rate they would have put about $2,730,000 in their pocket instead of the measly $1.05m.