Estimating Future Value With Cap Rates

[Mario Brown]

Forced appreciation is one of the biggest opportunities i see in MF over SF, but i don't know if i am thinking about this the correct way.

If I am buying a $21,620 revenue stream for $239,000 (9 cap), with an investment of $80,000 i  improve and stabilize the asset through a section 8 re-positioning,  shouldn't i then be able to and sell a new and improved $36,208 revenue stream for for $439,911 in 12-18 months. (9 cap)

Hypothetically, would a better looking, managed and performing asset be able to get an 8% cap rate? Assuming so the value would be $452,600? 

[Ashley Pimsner]

Just because NOI improved doesn't mean cap rate for subjects location improved. Increased NOI thru increased section 8 rents ( have you factored in or increased vacancy) or decreased expenses ( Have you considered RUBS for utilities to decrease expenses ) of $36,208 @9 cap should increase valuation to $402,311 at which point you could either attempt to sell or refi with commercial lender at 75% ltv and pull out your original 80k+ and simply enjoy the monthly cashflow.