I'm contemplating virtual tours for our next rental. 

Still own and self manage, but contemplating selling off these properties in order to fund next venture.

The project you are contemplating will be valued based on comps and replacement cost since CAP rates are typically only used for 5 units and up.

., is defined to be a person, firm or corporation who, for a fee, commission or other valuable consideration, or by reason of a promise or reasonable expectation thereof, lists for sale, sells, exchanges, buys or rents, or offers or attempts to negotiate a sale, exchange, purchase or rental of real estate or an interest therein, or collects or offers or attempts to collect rent for the use of real estate or solicits for prospective purchasers or assists or directs in the procuring of prospects or the negotiation or closing of any transaction which does or is contemplated to result in the sale, exchange, leasing, renting or auctioning of any real estate or negotiates, or offers or attempts or agrees to negotiate a loan secured or to be secured by mortgage or other encumbrance upon or transfer of any real estate for others, or any person who, for pecuniary gain or expectation of pecuniary gain conducts a public or private competitive sale of lands or any interest in lands.

I got an off market 3 family, where there was fire on the 3rd floor a few months back and the family is contemplating whether to use the insurance money to fix it, or to take the money and just sell the property. 

You haven't mentioned why you want to sell or cash out- you say you "aren't real estate people," but it sounds like you are contemplating another investment.

I've been contemplating this idea in my head for a few weeks now so I figured I'd take it to you guys. 

It's my home town, but I've never contemplated too much the idea of investing there.

He did exactly what you are contemplating but in NC. 

In response to your initial question, my gut reaction would be to analyze existing home price/per sq.ft in the specific area you're contemplating.