Can't Understand This Deal. Expertise Welcomed.

[Christopher Munn]

BP Community,

I recently came across a deal in Ohio for over 100 units and need some help on it. 

The property is 50% occupied and currently doing about 80k in NOI (Seriously Underperforming). Cap rates in the area can range from 7-9% on average. The property was listed at $3.5M but was just reduced to $3M. I thought this was outrageous but I contacted the broker. The broker said that the owner received over 5 offers including a $2.5M cash offer (that was refused). My numbers say all day that this property is worth less than $1.2M as performing. If performing around 95% occupancy, the property should do about $300k in NOI.

Could anyone help me understand the $2.5M cash offer? 

I know there's a ton of upside on this thing but I obviously shouldn't be paying for value that I will in turn have to create.

I've analyzed a good number of deals and am just baffled by this one. 

Thanks for reading my long post and hope someone can help me make sense of this.

[Robbie Reutzel]

@Christopher Munn,

Simple, there is more money than brains out there in the multi-family realm right now.  Although you're being smart and buying based on actuals, some people will buy based on how they project the property to perform.  You're not alone, we're finding that all over the place as well.