Develop an estimate of the market rent from comparable rentals and base your income approach estimate off of the market rents. Also develop a cap rate based on the market area, not what the owner tells you. It is possible that 10% is reasonable for restaurants in this area, but you should know for sure. Notate that the owner has given you a lease and the lease amount and reconcile that with the market data. Also, verify that it is a legitimate lease (signed by both parties, etc.).
May 25, 2010