Market value? Offer price? Numbers not adding up.

[Taylor Witt]

BP World -

I'm looking at a 16 unit apartment building and I need some advice on what the you see as market value and what would be a fair offer price.

The place is listed for $479,000, and the area Cap Rate is anywhere from 8-10%. I did my analysis on a purchase price of $400,000 and the place will cash flow pretty nicely at $1,500/month or so and 20% Cash on Cash. But after looking at the sellers numbers on the Schedule E taxes they showed a NOI of $25,000 for 2015 and $23,000 for 2014. Which would mean this place should be valued at $250,000 - $312,500 if I follow the equation: Property Value = NOI/Cap Rate.

I don't want to insult the seller with such a low offer, but seeing this makes me think I should offer less than $400,000. What do you see this property valued at? I'm torn on what I should offer, because even at $400,000 the place will cash flow nicely, but the sellers numbers aren't justifying the list price.

Can you help me figure out what I may be looking at incorrectly and what I could do to educated the listing agent/seller?