Another possiblity to consider is to only use delta times (rather than Raymond's post reading "03:07 PM", it would read "50 minutes ago" or something similar).

Whatever that delta is, that's the potential value of owner-financing.

. - let me translate what @Bob Bowling said :)Cap Rate is not a good metric of return, but if you use it as such, it uses the NOI (Net Operating Income) as the basis:NOI = Gross Potential Income - Operating Costs (operating costs do not include the debt service).So - the $36,000/annum of presumed CF is the wrong figure to use in a valuation formula since this includes the debt service:Cap Rate = NOI / Value = ($36,000 + Annual Debt Service) / Purchase PriceNow - to Bob's second comment as to why does it matter if Cap Rate really is 2.5%What Bob is likely talking about is that if you buy a building at 10 Cap, force the NOI up by 20%, and turn around and sell at 10 Cap, you will make money in the delta.

@Ming LimI wouldn't bother with the 10-yr term mortgages, the interest rate delta usually negates any false peace of mind.In fact, I would endorse using 5-year term, variable rate mortgages and hedging the interest rate yourself.

An increase of 15+ degrees in delta is a pretty big jump.The very basic calculators I tested show you need about double the number of tons to fix this.

@Gary Landon  if there is a note on the property  then he is doing a wrap.. and you make the delta between the two...

So the delta is $110K.  

Many do this that are starting out and get in way over their heads.. thinking Hey I bring them current for 5k  ( which is basically all the money I have.. and I am going to make the delta... the delta gets spent on consumer goods no reserves are ever established.. tenant goes bad.. it becomes a bad deal all around.So careful with it. 

I will caution you in that many of the Cap rate that you see published reflect investment grade properties (ie institutional buyers) so that for smaller properties the "delta" is very wide.My suggestion to you is that you develop your own cap rate requirement (equity vs debt - see band of investment analysis) and then apply that to each prospective investment.

I am considering going with Delta Community Credit Union.