A property with an annual rental income of $48,000 is priced at $640,000 and also has a monthly other income of $300. Based on this information, what is its gross income multiplier (GIM)?

Rationale

The gross income multiplier (GIM) is 13.33.

The GIM is calculated by dividing the property's price by its gross income. In this case, the annual gross income is the sum of the annual rental income and the annual other income, which totals $51,600. Dividing the property price of $640,000 by this gross income gives a GIM of 13.33.

A (12.4) YOUR ANSWER

This choice incorrectly calculates the GIM, likely by using an incorrect gross income figure or property price. To achieve a GIM of 12.4, the gross income would need to be approximately $51,612, which does not accurately reflect the provided annual rental income and additional monthly income.

B (3,600) YOUR ANSWER

A GIM of 3,600 is not possible within the context of this question, as it suggests an unrealistically high gross income or a very low property price. The correct calculation yields a GIM significantly higher than this value based on the provided income and property price.

C ($51,600) YOUR ANSWER

While $51,600 represents the correct total gross income derived from the annual rental income and monthly other income, it is not the GIM itself. The GIM is a ratio derived from dividing the property price by this gross income, making this choice an important calculation but not the answer to the question.

D (13.33) CORRECT

This is the correct answer, as it accurately represents the gross income multiplier calculated by dividing the property's price of $640,000 by the total gross income of $51,600. This calculation reflects the income-generating potential of the property relative to its market value.

Conclusion

The gross income multiplier (GIM) serves as a vital metric in real estate investment analysis, providing insight into the relationship between property price and its income-generating potential. By accurately calculating the GIM at 13.33, investors can make informed decisions about property valuation and investment opportunities, ensuring they consider both rental and additional income streams.

A property with an annual rental income of $48,000 is priced at $640,000 and also has a monthly other income of $300. Based on this information, what is its gross income multiplier (GIM)?

The gross income multiplier (GIM) is 13.33.

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