gross income multiplier


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gross income multiplier

A rule of thumb for evaluating the reasonableness of an asking price. One compares the monthly or annual gross income to the asking price and evaluates how that compares to typical ratios for similar properties. For example, some investors will not pay more than 100 times the monthly gross income for a property. If a house rents for $900 per month, the investor will pay $90,000 but no more.The method is not a good indication of value and would never be employed by an appraiser, but it has its uses as a preliminary qualifier or disqualifier of properties.

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Derivation from effective gross income multipliers and net income ratios
The State appealed the trial court's award based on a gross income multiplier, claiming that "the method of valuation dictated by the common law of eminent domain is the cost approach." The appeals court affirmed the trial court's ruling saying that the trial court's judgment that Minnesota statutes permit compensation for lost rental income was not clearly erroneous." Arkansas (1979) The trial court admitted valuation testimony based on income capitalization and rendered an award verdict partially supported by said income approach testimony.
Some assessors were applying gross income multipliers and sales comparison techniques without considering business income allocation, and inconsistencies arose that were attributable to application of data derived from bulk sales to the valuation of a single sign.
A linear regression and correlation analysis indicated virtually no correlation ([r.sup.2] = 0.011) between gross income multipliers and operating expense ratios.
The gross income multiplier would typically be lower than the net income multiplier, but by how much is in question.
Several variables affect the gross income multiplier, the strongest effects coming from Age and East.
He employed an outdoor advertising subconsultant, developed a gross income multiplier, and converted the advertising revenue to a value estimate for the business asset - the billboard.(5)
Outdoor Advertising Signs advocates the use of the sales comparison approach, specifically the gross income multiplier, to value the interests of outdoor advertising firms in eminent domain actions.
HISTORICAL PERSPECTIVE OF THE GROSS INCOME MULTIPLIER (GIM)
Gross income multiplier |(GIM).sup.3~ = Sale Price (Value)/Gross Income (GI)
The Appraisal of Real Estate, ninth edition, refers to the use of multipliers as a unit of comparison and provides examples of the use of the gross income multiplier. (5) Gross income multipliers are relied on in the market and can be an independent unit of comparison.
If external obsolescence becomes present in a property where it did not previously exist, then one would expect that probably vacancy rates could rise, gross income multipliers diminish, interest rates rise, and loan-to-value ratios rise.