Jon, As Russell Grey would say “If you don’t like the answers you are getting, ask a better question.” I think I understand your question but I’ll try and shed some light on why your question may need a bit of calibrating and why you might not be getting the responses you were hoping for.
In all reality CAP rates really don't apply to valuing single family (including 2-4 unit residential multifamily). Chris gave some great reason, I'll give my two cents too.
First, if you find a single family listed as an investment and the realtor gives a CAP rate, send me their financial calculations of how they arrived at that CAP rate. Then I'll share with you an apartment community statement and how CAP rate applies to their valuation and you'll see it's not even the same world.
When valuing single family they are valued based on price per square foot and comp's. One reason is because the majority of people transacting single family (and the purpose it's built) are buying to live in the property. So Suzy homemaker can pay way more for a property with beautiful colors and the perfect swing-set for her kids, than you can pay from a cash flow perspective. I sold a house in Ardmore (well known neighborhood in Winston Salem) a couple years ago. The home had been tenant occupied for nine years and looked rough. A five minute conversation with my realtor showed another property similar condition and square footage had been sitting on the market for several months and wasn't selling. A cute little home just down the street with almost half the square footage sold in two days because it was move in ready. I would have sold the home for $100k, someone could have invested $20k or less and it would have been worth $150k. But the majority of people in single family can't see the potential. So I did just that, I put $20k in it and it sold for $150k in a week. And none of the valuation was based on how much it would rent for. This is another complete contradiction to commercial property. Where we as buyers walk in, see dated carpet, see old cabinets and see mis-management, we begin salivating because we know we can push NOI which then directly improves valuation. A great example is another investor I know purchased a property, re-negotiated the cable contract, signed a piece of paper and the property was worth $600k more with the stroke of a pen. I'm not saying that can't be done in single family, but I've never seen a cable contract change the value of a single family.
Third example of why single family is so different from commercial is because you could buy a single family next week, get a thirty year loan and the only time you interact with the lender is at or before the closing table. Once you own the property it’s your responsibly to pay the mortgage and the lender doesn’t really care how you do that. Seriously, you could sell crack and as long as you pay your mortgage they don’t care. In commercial it’s almost like a marriage with your lender. They will have a say, if not control, who you chose for property management. They will inspect the property every year and tell you what you need to repair and they will tell you when you can sell it and if you chose to sell it earlier or later than their preference their will be penalty costs (this is mainly because your loan becomes a derivative investment on the lenders balance sheet).
In summary, capital flows into commercial real estate as an investment seeking a return. To best demonstrate what the current market is willing to pay for streams of income the use of CAP rates are applied to show what recent buyers are willing to pay for streams of income. Nobody buys a 400 unit apartment property because they need a place to live. But they buy a house because they need a place to live. So because NOI isn't applicable to most single family transactions, price per square foot and comp's are mostly used when valuing single family.
