“For me, as someone who routinely buys, restores, and holds these types of property for the long term (including a property right across the street from this one that is roughly the same age / type of construction), the only thing that I consider when determining value (and this a pretty standard / typical metric) is CAP rate.
Specifically, I use the CAP rate at current rents and expenses to determine what it is worth today . . . and I calculate a projected CAP rate after renovations to determine what it will be worth with higher rents.
The CAP rate is just a simple calculation for the rate of return on your cash in the deal. If you are simply buying a property and continuing on as is, the CAP rate is the return (from cashflow) on your down payment. If you are planning to upgrade the property the CAP rate is the rate of return on your down payment + carrying and renovation costs . . . based on the new rents.” [Jared M., commenting on The End of Another Almost Afton Oaks Apartment Complex?]