post construction value estimation

[Ockert Kruger]

How is value determined for a construction project and for forced appreciation - is it something I can build a spreadsheet for eg calculating cap rate or is it something that can only be done by professional appraisers?

1. If were to approach a developer to build a multifamily property and the cost would be $2million, how do I determine what the post construction value (for cash out refinance) would be once its filled with tenants. Even if I know what rents I'm going to get I still need to estimate the cap rate to determine the value, cap rate is based on purchase so how does that equation work?

eg cap rate = NOI/build cost

Does the bank use a general cap rate for that area and building type? How is that determined?

2. If I buy a multifamily and raise rents - same question, how is the new value determined?

eg cap rate = NOI/current market value

To determine the current market value a cap rate needs to be selected.