Due to new tenants, and improvements I made to the building even at a conservative 8% cap rate (my purchase cap rate) the building is worth around $1.6M.

If they are buying it as a Investment they are capped at 2% Max of the purchase price.

@Roger MoralesI live in St Augustine, and the Jax market can be challenging, with insurance costs, the low cap rates, and the assets that are older.There are so many Southeast markets that would be favorable to invest in.

Landfills make me think: odor, smoke, noise, bugs, and water supply contamination.Construction on top of landfill: additional costs, abnormal settling, off gassing, heavy metals, and surface leaching if a capping fails.

You can use this tool to figure out that part: https://docs.google.com/document/d/100dRzu-iQEIZbR1adxIASdH2...Once you have that you should engage a local broker to discuss the options for those types of uses in your market and they will be able to help you understand the overall picture and cap rates of the various options.

Perhaps the property doesn't appraise as well as you projected or there are unexpected operating expenses or cap ex that's incurred in year 1?

Cap x is 5% and calc off that and prop mgmt is 10%, etc.

5 homes as collateral 8% for 5 years balloon for 20 yearsor 3 year floating capped at 7.5%-5% for 25 years.

I would not count on short term appreciation to be great.Negative cash flow can get old fast   Especially when large cap expenses occur.  

Then we had a bunch of cap ex (roof, water heater, appliances) all needing to be replaced within a 2 year period.