Therefore, any NOI used to derive the cap rate or market cap rate is totally bogus.Instead of cap rate, I simply look at cash flow and equity as the determining factors in deciding if a property is a good deal.Good Luck,Mike

All of that boils down to a derived CAP rate that covers the required tranche yields with a positive cash flow.

But these are all just estimates, so double counting makes it that much more conservative.An alternative is to start with the NOI derived from the 50% rule.

I divided the NOI by the derived cap rate(from the band of equity formula) and correct me If I'm wrong here which I probably am, but it says that the maximum purchase price is $4,494,500.

If you can't understand how businesses operate, how they derive thier income to pay you, the risks involved with various business types and the legal matteres surrounding business operations, you have no business considering that type of commercial property.

The percentage of the income that the entity receives derived from the borrowed funds is taxed.  

That is, you're deriving a personal/family benefit by living there.

For any one property in any particular year, the results can vary dramatically.The 1% rule and similar ones are just a derived value.

This is a site derived/created figure and may or may not reflect the market.

It is not the actual property itself where we derive the value from, but how we uitlize that property.