Increasing the Velocity of Value in an apartment building with income multipliers

The Value of an apartment building is based on income produced by the property. Once you know the income of the building, you use either the Gross Rent Multiplier or the Capitalization Rate to determine value of the building The multiplier number is determined by the market. In other words, what are investors paying for income streams from the buildings in your market? In general, increased income creates increased value as determined by the multipliers described below.

Gross Rent Multiplier (GRM)

Capitalization Rate (Cap Rate)

This is popular because it is also easy to compute. It is arrived at by dividing the Net Operating Income by the price. It is also indicated on the MLS sheet for each property. In theory, it is a better measure than the GRM because it considers the Net Operating Income (Rent less the expenses of the property). The problem is that the expenses of the property are rarely reflected accurately in the MLS and often not accurate even when they come directly from the owner. In an existing apartment, you can study the market and determine it there is anyway to increase tenant desired services for additional income and full occupancy. Here are a few ideas: