What is the gross income multiplier (GIM) for a commercial building that produces an annual gross income of $136,000 and is sold for $888,000?

What is the gross income multiplier (GIM) for a commercial building that produces an annual gross income of $136,000 and is sold for $888,000?

• A. 0.153.
• B. 15.3.
• C. 13.06.
• D. 6.53.

Answer: (D)

To find the gross income multiplier (GIM), you divide the sale price of the property by its annual gross income. In this scenario, the commercial building's sale price is $888,000, and its annual gross income is $136,000. The calculation is as follows: GIM = Sale Price / Annual Gross Income GIM = $888,000 / $136,000 When you perform the division, you get a GIM of approximately 6.53. This means that for every dollar of income generated by the property, the market is willing to pay about $6.53 in purchase price. Understanding GIM is essential in real estate as it helps investors evaluate the relationship between income generation and property valuation. It’s a quick way to assess whether a property is priced appropriately relative to its income potential.

To find the gross income multiplier (GIM), you divide the sale price of the property by its annual gross income. In this scenario, the commercial building's sale price is $888,000, and its annual gross income is $136,000.

The calculation is as follows:

GIM = Sale Price / Annual Gross Income

GIM = $888,000 / $136,000

When you perform the division, you get a GIM of approximately 6.53. This means that for every dollar of income generated by the property, the market is willing to pay about $6.53 in purchase price.

Understanding GIM is essential in real estate as it helps investors evaluate the relationship between income generation and property valuation. It’s a quick way to assess whether a property is priced appropriately relative to its income potential.