Question regarding property value on a multiuse property

[Andy V.]

I was recently looking at a property that had retail on the first floor and 9 apartments on the second floor. There is a vacant basement that could be rented for storage & a 3rd story that can be built out for additional apartments. I contacted the listing broker and they sent me rent roll and operating expenses. At first, things looked pretty good...$50k+ annual NOI & an 8% cap rate which would only get better by building an additional 6 apartments. There was no vacancy with long term tenants in place, but most of them were on month-to-month leases. Then I realized that the NOI assumed 0 vacancy...strike 1. By adding the possibility of vacancy, cap rate dropped below 7%. Then, I saw a note that showed the current owner's loan payment amount & realized that even using his numbers, it has a negative cash flow.

The property was being listed with seller financing, which was a great find.  However, I still wanted to check to see if the listed price was about right, or way out of the ball park.  Problem is, it's kind of rural and there aren't many other properties in the area to compare to, so what is the best way to find the actual value of the property?  With a little bit of up front investment, this property still has the potential to make good money, but I would like to know that the asking price makes sense.  Any suggestions would be greatly appreciated.