Including Appreciation in Multifamily Analysis

[Joshua McGinnis]

Pretty basic question: what is the best way to model appreciation gains in a long-term multifamily analysis if multifamily values are based on NOI and cap rate?

Is appreciation in property values simply represented in gross income growth? What if rents grow at 3% annually, but property values grow by 8% annually in an area? In that instance, if the cap rate stays the same, the calculated value will be artificially lower than the market value so how did you model or bake-in this market appreciation into say a 5 or 10 yr model?