With some of my clients, I've seen discounts of 30% to 90%.Here is a real-life example: I invested in a $50K note; it was second TD but with significant equity (over $200K) protecting my investment. 

I mainly want to ask if these assumptions are reasonable and if there's anything I haven't considered:(1) multifamily units in NJ close to New York City, ~$1,000,000, 20% down payment, (2) Using the following assumptions: 4% appreciation rate, 6.5% interest rate and 5.0% refinance after 5 years, $10,000 yearly maintenance fee(3) ~$6,000 monthly rental and assume 3% increase yearly with 5% vacancy rate(4) Based on the above, the calculated IRR if selling at the 10th year is ~19% (considering tax benefits) and ~17% (without tax benefits).

Ultimately you will have to sell your house at a discount. 

My question would be is a 6 cap the going rate in the area for that building.

Reason is a Heloc generally carries a higher rate on a shorter term and "Can Never" be used as an "Asset, or for PITI reserves" which are both required when you buy an investment property. 

@Stephen Fleming your cashflow probably won't be what you think it will be:(Have you factored in the new property taxes at homestead millage rates?

What about rate and term refinancing?

The interest rate is not special nor is the 20% down (80% LTV).  

I just had a bank tell me they would take a 40%+ discount on a $400k asset which six months ago they would have wanted a 10-15% discount.

As-is cap rate of 7.5% in my market (kc) would be pretty awesome to buy.