Bay Area Real Estate Wiki

This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong.
====== 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.

===== Types of Gross Multipliers =====
  * **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**

===== Core Formulas =====
  * **GRM = Sales Price ÷ Gross Monthly (or Annual) Rent**
  * **Value = Gross Rent × GRM**

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

===== Key Characteristics =====
  * Uses **gross income only**
  * Does **not** consider operating expenses
  * Based on **comparable sales**
  * Quick estimation method (less precise than [[cap rate]])

===== Example =====
  * 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 vs Capitalization Rate =====
  * **Gross Multiplier**
    * Uses gross income
    * Simpler, less precise

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

===== Exam Tip =====
  * Gross multipliers **ignore expenses**
  * Use **GRM for residential**, **GIM for commercial**
  * Value is always **income × multiplier**