Actual NOI extremely low, not supporting asking price

[Anthony King]

I see a lot of multifamily listings that have the price set steictly on proforma numbers. I always hear to set your offer price based on actual rent rolls, T-12, current NOI. Cap Rate, etc. However, I come across a lot of properties that have had the same owner for 20+ years and they haven't raised the rents in a decade or more with 75% occupancy.

To be more specific, I found a 16-unit property asking $1.4mil, with avg actual rents at $429/month and the proforma rents from broker say $800/month. They also have 4 vacant units, for 75% occupancy. Using current/actual numbers I find a .5 DSCR, and a 2% cap rate.

How do you price a home like this when actual performance supports a much lower offer price, but the potential is there to support the asking price? Of course the owner holds all the cards so I don't see how offering half of asking helps me acquire one of these properties. Do you pay for potential? Do you meet them in the middle?