Property Valuation
In Michigan, the 'income multiplier' approach used for small income properties is limited because:
AIt is too complex for most appraisers
BIt ignores operating expenses and uses only gross income, which may not reflect actual profitability✓ Correct
CIt is prohibited under USPAP
DIt can only be used for properties with more than 10 units
Explanation
The gross income multiplier (GIM/GRM) approach ignores the property's actual expenses. Two properties with identical gross rents but different expense levels will show the same GIM value, potentially misleading the investor about actual profitability.
Related Michigan Property Valuation Questions
- The principle of progression in Michigan real estate valuation means:
- External obsolescence affecting a Michigan property's value could be caused by:
- In Michigan, the 'paired sales analysis' technique in appraisal is used to:
- A capitalization rate (cap rate) of 8% applied to a net operating income of $40,000 results in an estimated value of:
- The replacement cost in Michigan's cost approach represents:
- In Michigan, 'oversupply' in a real estate market segment will generally cause property values to:
- In Michigan, a 'restricted appraisal report' under USPAP is intended for:
- A Michigan appraisal report prepared for a federally related transaction must comply with:
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