Cap rates in determining MF property value

[Olu Efunwoye]

I understand the concept of the Cap rate as a factor in the asking price and NOI. But I still need to understand how the cap rate can be justifiably fair. How can I safely put a cap rate just based on my asking price and NOI?

I understand the equation for asking for the price is NOI/cap rate. While NOI is a given number that can be derived easily, how is the cap rate derived? I have seen some rely on cap rates based on community/area, but how safe is that for both the buyer and the seller in agreeing on the sale price? What is the function of age, structural defects, community, population, etc. on the cap rate?