If you acquired an 8-plex with $7,200 gross rents, what would be

[Steve S.]

a reasonable purchase price with the following assumptions:

- 25% down

- Property taxes around 2.5%

- Insurance around $4,800

[Anthony Dooley]

It depends on what cap rate is acceptable. If the NOI is 3600/.06 = $60,000 purchase price. A bad area cap rate may be .08 or .10

[Anthony Dooley]

Gross rent minus expenses = Net Operating Income. Divide the NOI by an acceptable rate of return if you paid cash for the deal. This would be your purchase price. Use the last 12 months (trailing 12) of actual numbers. Don't guess and don't calculate what it could be.

[Steve Vaughan]

Instead of how much down and an expense that's 2.5% of an unknown, we need to know the age, condition, class of area and the market cap rate of that class. 

Is it a high end suite style place or a tin shack with outhouses?

Here I pay about 100x monthly.effective gross for b assets but my taxes and insurance are way lower. B cap rate here is 6.5%.

[Steve S.]

I guess I'm struggling to get cap rate vs cash on cash. 

It's a B/ B+ neighborhood. Land locked. 

Rather high end property I'd say. Granite countertops. Built in 1980. 

[Thomas S.]

It depends on the market. In my market I would be looking at 600 - 800 K. Ideally I would like to pay 80K or less per door.

However there are a thousand variables that could/will impact that number.

[David Alvarado]

Cap rate and cash-on-cash (COC) are two very different things. Cap rate is based on market trends and the NOI taking out the financing variables, while your COC is based on the operations of the property along with the financing terms you are able to achieve. 

Figure out a value of the asset based on the following: the $7,200 of gross rents is monthly? If so, you're looking at $86,400 per year in gross potential income. From there you'll want to add whatever other income you might have from laundry, storage, etc, and then you'll want to back out all your expenses - vacancy, bad debt, taxes, insurance, utilities, prop management, professional fees, general and administrative, advertising, etc. As others have mentioned a reasonable purchase price is based on the market trends - comps and cap rates for similarly sized product in your market. Last I saw for primary/secondary markets you can expect a cap rate sub 8% - again this will be highly dependent on what is actually happening in your market so do some DD here. So, take your effective gross income minus your expenses to get your NOI - use a T12 here. Then use the market cap rate for similar product and you'll reach a potential value. You can even use a cap rate range; like 7% - 7.5% to see where that puts you. Compare this number to comps on a per unit basis to see if anything looks funky - higher rents versus comparables will give you a higher per unit cost so be sure to double check. 

Next, run some analysis based on your newly found estimated value and some financing assumptions - you can use the Bigger Pockets calculator for this or run your own model. See what numbers make sense and you'll reach a reasonable offer. Hope that helps.