That Phoenix deal taught me to always check the cap rate math myself

I was at a lender meeting for a strip mall in Phoenix last month, and the broker's packet showed a 7% cap rate. I ran the numbers after the meeting and found they'd used last year's full occupancy, not the current 85%. The real cap was closer to 5.8%. It completely changed how I look at every deal sheet now. Do you guys ever trust the pro forma numbers you're given first, or do you always rebuild them from scratch?

2 comments

2 Comments

davis.dakota19h ago

But that's just how the game works.

hannah24021h ago

Ever notice how some brokers will use "market rents" on a half empty building? Saw a deal where they priced units at what the new luxury place down the street gets, but their units hadn't been updated in 20 years. The pro forma looked great until you realized the income was pure fantasy. It's not just wrong math, it's using numbers that can't even happen yet. Makes you question every single line item they give you.