What is the formula for calculating the gross income multiplier (GIM)?

The formula for calculating the gross income multiplier (GIM) is based on the relationship between the sales price of a property and its gross annual income. The correct formulation describes how many times the gross annual income fits into the sales price.

By dividing the sales price by the gross annual income, you can derive the GIM, which represents how much investors are willing to pay for each dollar of income generated by the property. For example, if a property sells for $300,000 and generates $30,000 in gross annual income, the calculation would show that the GIM is 10, indicating that the property's sales price is 10 times its annual income.

Understanding the GIM is essential for appraisers and investors as it helps in assessing property value relative to its income-generating potential. It can also be used in comparative analyses to evaluate whether a property is being overvalued or undervalued based on income compared to other properties in the market.