- Also, if I were to borrow against this home, would it prudent to form a business entity of some sort?

Drive for dollars in a neighborhood you like and form a relationship with a Realtor in your area.

People are buying on bubble numbers of the last 1 to 2 years and pro-forma the number like it will last another decade after they own it. 

Some things you could to make your case is pull sale comps for the neighboring properties that sold in that range (simply being listed at $15-$20 psf doesnt count until a sale closes); you could also put together a pro-forma analysis for your speculative development using lease comps that justify a higher land price.

I asked for the pro-forma, plugged in the numbers and it failed miserably.

The pro-forma's once you properly underwrite are a 7 cap at best.The sellers are selling to the uninformed.

@Lou R.There are many possible reasons:NOI numbers in the pro forma are likely rosy ... a thorough analysis could tell a quite different story;There may be other liens or defects in title on the property;The building is facing functional obsolescence or is carrying too much deferred maintenance;There is a forthcoming change in the local economy (major employer downsizing/leaving) or neighbourhood (redevelopment, highway or manufacturing being built close-by);The list goes on, but it always comes down to a lack of value in the proposition: either there is a significant problem with the business or the asset which makes the acquisition costs unreasonable.Now, sometimes this can be a good thing - if you are certain you have identified the issue(s) and know you can effective remedy them at a cost which the business could afford, you may have yourself a deal.  

Yes, the turnkey idea sounds great in theory, but almost a too good to be true situation when you poor over the pro-formas.  

@Dan BakerYou should stop by our meetup in Roppongi, there are a few guys with some good experience on this front.One thing I can say is, take the sellers/agents pro formas with a serious grain of salt.

I've read some literature talking about comps and pro-formas as well as viewed some of the bp webinars where Brandon goes through the calculators but, is there someone out there that can walk me through the process or "dummy-proof" it for me.