Gross Multiplier (Appraisal)

A gross multiplier is a valuation tool used in the income approach to estimate the value of income-producing property based on gross income, not net income.

• Gross Rent Multiplier (GRM)
  • Used primarily for residential rental property
  • Based on gross rent

• Gross Income Multiplier (GIM)
  • Used for commercial property
  • Based on gross income

• GRM = Sales Price ÷ Gross Monthly (or Annual) Rent
• Value = Gross Rent × GRM

• GIM = Sales Price ÷ Gross Annual Income
• Value = Gross Income × GIM

• Uses gross income only
• Does not consider operating expenses
• Based on comparable sales
• Quick estimation method (less precise than cap rate)

• Comparable sold for $1,200,000
• Gross annual income = $120,000
• GIM = 1,200,000 ÷ 120,000 = 10
• Subject gross income = $100,000
• Estimated value = 100,000 × 10 = $1,000,000

• Gross Multiplier
  • Uses gross income
  • Simpler, less precise

• Cap Rate
  • Uses net operating income (NOI)
  • More precise valuation

• Gross multipliers ignore expenses
• Use GRM for residential, GIM for commercial
• Value is always income × multiplier