Two analysts question a seller's 12% cap rate on a car wash, suspecting inflated NOI. They argue the property's true NOI is closer to $150,000, yielding a realistic 7.2% cap rate, and stress verifying financials before making an offer.
Did you do the math on it to see like where he was at as far as cap rate and all that?
With the updated price?
It said 12%, but let's see what the math actually worked out to, right? But go back down right there. All right. So boom, boom. All right. So we don't want to tell them that the cap rate's 12.1%. We don't believe their NOI. That's what we're having an issue with.
Okay. Because essentially if we lowered the cash offer by almost from $3.7 million to $2.1 million, that increases the cap rate.
Keep going down. Let's look at the DSCR score. Right. Because right here on DSCR, well, the annual debt service wouldn't be zero. It'd be based on $2.1 million. Let's say we're borrowing the full $2.1 million. And would that— what is our DSCR score on that? Okay. Keep going down. So risk adjustment is a 12% required yield. We can go do a little research on what the yield should be on a car wash. So, but we believe they're more around $150,000, which is why we think it's a 7.2 cap.
Okay.
See the difference now?
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