Property Valuation
The 'effective gross income multiplier' (EGIM) is calculated by:
ANOI ÷ Sale price
BSale price ÷ Effective gross income✓ Correct
CGross rent × 12
DNOI ÷ Effective gross income
Explanation
EGIM = Sale Price ÷ Effective Gross Income (annual). It is similar to the GRM but uses EGI (after vacancy adjustments) rather than potential gross income, making it a more accurate value indicator.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Math Concepts
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