Questions and Answers
What is a Gross Income Multiplier (GIM)?
What is the formula for calculating GIM?
Sales Price / Annual Income
How do you calculate the Sales Price using GIM?
Annual Income x GIM
How do you calculate the Annual Income using GIM?
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What is the value of a commercial property with an annual income of $33,600 and a GIM of 9.3?
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What is the GIM of a commercial property with an annual income of $33,600 and a value of $312,480?
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Study Notes
Gross Income Multiplier (GIM) Overview
- GIM is a method to estimate the value of investment properties by dividing sale price by gross annual rental income.
- Commonly used for commercial real estate, including shopping centers and apartment complexes.
- Does not account for expenses like utilities, taxes, maintenance, or vacancies.
GIM Calculation
- Formula: GIM = Sales Price / Annual Income
- This simplifies comparing property values and understanding investment potential.
Related Calculations
- Sales Price can be determined by multiplying Annual Income by GIM.
- Annual Income is calculated as Sales Price divided by GIM.
Example Calculations
- For a commercial property with an annual income of $33,600 and a GIM of 9.3:
- Sales Price = $33,600 x 9.3 = $312,480
- To find GIM from given values:
- GIM = $312,480 (price) ÷ $33,600 (annual income) = 9.3
Limitations
- GIM is a simplified metric; more detailed valuation methods include capitalization rate (cap rate) and discounted cash flow.
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Description
Explore the key concepts of the Gross Income Multiplier (GIM) through these Unit 2 flashcards. Understand its definition and application in valuing commercial real estate properties, including its limitations. Perfect for students and professionals looking to deepen their knowledge of real estate valuation.
