This is basic economics, finance and appraisal methodology.

In other words, if you analyze 10 deals using the same methodology and relative estimates and they all come out +/- 12% cap, then I would say that your method is consistent and can be used as a baseline to compare  your actual  purchase to. 

The amount the buyer paid for the income it produced (CAP) can be a useful comparison - provided the net income and CAP is calculated using the same methodology in all properties being compared.Smaller, 2-4 unit buildings, are residential properties, not truely multi-unit, and are valued using comparable sales.

Even then, it needs to be calculated using the same methodology in each instance to provide an apples to apples comparison.  

My current role invovles analyzing loan profitability, assesing portfolio risk and designing new process/methodology to maximize profits for my employer. i work scpecifically with mortgages, so i have seen and gain a deep understanding on how a mortgage work and the profits behind them. that said, it made me realize that if i couldn't be a lender i could probably an investor or whosaler to maximize my cash flow. i plan to be financial independant by the time i am 45. i am now 32, so i only have 13 years left the clock is thicking!

When I use this methodology, on top of my capex/RM analysis, I can't see how 99.9% of turn-key opportunities could possibly make sense.

But how do you think the basic methodology works?

That said, even for places that fall out of the price ranges, the methodology in the book still holds...

The other methodology was $150,000 at 65% or $97,500.  

If you do collect the rent (delivered or otherwise) and they have any outstanding previous late fees, apply the payment first to all other charges, if your lease includes that wording.Then give notice and file for eviction for the shortage.At least that is my methodology, as in Texas a property manager can only represent a landlord in court for eviction on unpaid rent and holdover.