If he stopped repairing things for a year, and is showing “projected” rents, rather of actual rents collected, the income figure could be $15,000 too high. You get $440,000 – the estimated value of the constructing. Is the seller is displaying you ALL the typical costs, and not exaggerating earnings? Estimated value equals net earnings just before debt-service divided by cap rate – this genuinely is straightforward genuine estate math, but the difficult part is getting accurate income figures.