Multifamily property

[Rikard Lorén]

Hello !

So I have a question, I listening to Ken Mcelroy and he says: to get a value of a building, take the net operating and divide it with the going capitazilionation rate.

So, on one building here, I did it and:

Price: 4,3 Million

Income: 434 000 /year

expenses: 75 000/ year

434 000-75 000= 359 000

so: 359 000 ( net operating ) divided by 6% ( capitalitation rate ) = 5 983 333

So: If we say that the net income is correct, and the cap rate, does that then mean that the seller COULD sell it for 5 983 333 and is loosing money but he don't know it ? and then thata if I bough it, I would make a profit of 5 983 333-4 300 000= 1 683 333 million ?

SO Question: If the numbers are correct, income, cap rate and expenses does that mean that the building is worth atm 6 million and the seller is making a loss, selling it for 4,3 million and COULD sell it for the 6 million instead ? or I'm missing something ?

//Rick