If you're reading this post, it's very likely you've read or watched videos of previous posts of mine in which I talk about one my favourite reasons for investing in apartment buildings, that is the WEALTH MULTIPLIER EFFECT!.
You see, contrary to small rental properties containing one to fours units, for which the 'sales comparison' method is used to determine the value of the property, when you invest in larger apartment buildings of five or more units, the way the value of the asset is determined is called the 'income capitalization' approach, or 'cap rate' approach.
According to the cap rate valuation approach, the value of the property is arrived at by dividing the property's net operating income, or NOI, by your market's prevailing or average cap rate for comparable properties. To calculate the NOI, you subtract the property's operating expenses from the rental income.
The wealth multiplier effect, also sometimes called the 'big lift effect', kicks in whenever you increase...