What the income supports, against what they are asking
Value the rent roll at a cap rate you would actually transact at. The gap is not a verdict — it is a specific measurement of what the asking price is assuming, and therefore what to ask about.
Price the income yourself before you argue about the price
A cap rate printed on a flyer is a claim about a market. Yours is a claim about what you would pay. Putting the two side by side turns a negotiation about a number into one about an assumption.
- Income from the leases, not the summaryNOI derived from the rent roll you built, so the value rests on what is contractually there rather than on what the marketing said was there.
- A range, not a pointWhat the income is worth across the cap rates you would consider, because the honest answer to what something is worth is a band.
- The gap, stated as a numberHow far the asking price sits from the range, which is the figure you can put in an email rather than a feeling you have to justify.
What the income supports
Low
$16.1M
Midpoint
$17.4M
High
$18.2M
- In-place NOI
- $1,209,604
- Market cap rate
- 6.95% – 7.50%
- Price per SF
- $87 – $99
The range is the deliverable. A single number invites an argument about the third decimal instead of about the cap rate.
A price above the income is not automatically wrong
Plenty of good deals are priced above what the in-place rent roll supports, and for legitimate reasons: rents below market, vacancy that is worth leasing rather than discounting, land value, a use nobody has pursued yet.
What you want is the size of the gap, not a verdict on it. If the asking price is 9% above what the current income supports, then 9% of the price is resting on something other than what the tenants are contractually paying — and that something is now a specific thing you can go and interrogate.
The failure mode is not paying above in-place value. It is doing so without having named the reason.
Run it again at a flat exit cap
If the deal only works because you sell at a tighter rate than you bought at, the return is a bet on market compression rather than on the building. That is a legitimate bet and it should be a conscious one.
- Thirty seconds, and it reframes the dealSet the exit cap equal to the entry cap and see whether the numbers still clear your threshold. If they do not, you now know what you are actually buying.
- Then compare against their cap rateThe seller's stated rate and the rate your rent roll supports, on the same price, with the income lines behind both.
Variance check
The seller states
8.25%
On stabilized pro-forma NOI
The rent roll supports
7.22%
On $1,209,604 of year-one NOI
1.03 points worse than advertised at the asking price. The seller’s number lets the dark 22,500 SF from day one at market; yours lets it after the downtime and free rent this deal actually assumes.
- Base rent
- $1,315,139
- Reimbursements
- $405,471
- Credit loss
- ($17,206)
- Operating expenses
- ($493,800)
- Year-one NOI
- $1,209,604
Base rent is the three signed leases plus the vacant suite’s modelled lease-up. Reserves and leasing costs sit below this line, not inside it.
Questions people ask
How do I know if an asking price is reasonable?
Value the income at a cap rate you believe rather than the one printed on the flyer, and compare. The gap tells you what the asking price is assuming about the market, the rent roll or both — which is a far more useful thing to know than whether the price 'feels' high.
What cap rate should I use?
The one you would actually transact at for that asset, in that submarket, with that rent roll. There is no correct answer we can give you, and a tool that supplied one would be inventing the part that requires judgement. What DealWise does is make it trivial to see what several different answers imply.
Is this the same as checking the offering memorandum?
Related but different. Checking the OM asks whether the seller's own numbers hold together. Checking the price asks what the income is worth at a rate you choose. A document can be entirely accurate and still be asking a price you would not pay.
Should I check the exit too?
Yes, and it is the check people skip. If a deal only clears your threshold because the exit cap is tighter than the entry cap, you are not buying an income stream — you are betting on compression. Running the same model at a flat exit cap is a thirty-second test worth doing every time.
What if the price is above what the income supports?
Sometimes that is correct and the answer is upside the current rent roll does not show — below-market rents, vacancy worth leasing, a redevelopment angle. The useful output is a specific figure for how much of the price rests on something other than in-place income.
Where this goes next
Check whether an OM is honest
The seller's own arithmetic, checked separately.
Property value calculator
NOI at a cap rate you believe. Free, no signup.
Exit & sale modeling
The other assumption the price rests on.
Exit cap rate explained
Why compression is a bet rather than a plan.
What is a good cap rate?
Benchmarks by property type.
Decide whether to buy
The full job this is one question inside.
Price it yourself before you counter.
Build the rent roll from the documents, value the income at a rate you believe, and see exactly how far the asking price sits from it. Free plan, no credit card.