I have however come across a few deals where the sponsor purchased the property at a much higher cap rate (around 7.3) than the market cap rate (around 6.4) and then projected the exit cap rate at around 6.8 (which is higher than the market cap rate but lower than the entry cap rate).

Is the bang worth the buck ? 

so in New Jersey you have $0 of maintenance/cap ex and zero vacancies? 

I'm estimating a cap rate of 7.0%-8.0%, and 5) (this isn't you, more the model itself) The future property value shouldn't be based an annual increase (3% in your version), but rather on an expected cap rate at exit.

I would never buy commercial at such a cap rate unless I was doing a 1031. 

You can get more bang for your buck. 

But they’re still the best bang for the buck.

Completely rehabbed place like ours described is in the 6-8 cap rate realistically.

I'd rather take a lower cap on something established, versus a higher cap on some new chain.    

Like someone else mentioned, FHA loans are good in low credit and high DTI scenarios, but tend to be less bang for the buck compared against conventional.