Ultimately we would like to leverage into a home, so trying to figure out a way to extract value out (vs. keep).

@Arron Robertson loans are expensive and keeping your payment low by not extracting equity will make renting the condo easier because you can rent for less if need be.

In fact, this flaw is so obvious, it blows my mind that so many appraisers stick to their guns and profess their adjustments have 1) been extracted from market data and 2) they are reliable.

Rent Control is everywhere because new people that plan to move those cities can't vote against these rent control laws that hurt them. and us landlord are hated micro minority.The only way to deal with these uneconomic laws is on the State and National level because it is in the best interest of the State and Federal government to extract much Tax as possible from rent.

Rents don't move in a linear fashion with values but they will track direction-ally together; so, cash flow increases over time with an appreciation strategy.You can extract value/equity out of a property with a refinance...a sale or exchange is not required.The appreciation strategy is either long-term and you ride the cycles or you have to pivot at your planned exit value. 

However, if you have an NOI of $40,000 and a market extracted cap rate of 10% this would equate to a value of $400,000 or $40,000.

All the profit must be extracted from the borrower in some form or another. 

She has no retirement so we would like to add a rental for her soon and she has almost no cash in the bank.My question is, what do you think may be the best way to extract the equity, and to use the value in this home?

Or is this an approximation extracted from debt to income ratio?

For starters, you can find a ton of FREE SFR data here: https://www.realtor.com/research/data/ For SFRs, we use the nationwide, residential "ZIP" data and extract what we need. 2) Since you are out of state, you need "Boots On The Ground".