Property Valuation
In Minnesota, the 'income multiplier' method of valuation differs from the cap rate method in that:
AThe income multiplier uses NOI; the cap rate uses gross income
BThe income multiplier uses gross income or gross rent without deducting expenses; the cap rate divides NOI by value✓ Correct
CThe income multiplier is used for residential properties only
DThere is no practical difference between the two methods
Explanation
The gross income multiplier (GIM) or gross rent multiplier (GRM) uses gross income without deducting expenses, making it a quick but imprecise method. The cap rate uses NOI (after deducting expenses) for a more accurate income-based valuation.
Related Minnesota Property Valuation Questions
- A Minnesota property has a gross annual income of $120,000, a 7% vacancy rate, and operating expense ratio of 40% of EGI. What is the NOI?
- A Minnesota appraiser is completing a cost approach appraisal. The replacement cost of the improvements is $280,000. Depreciation is estimated at 25%. The land value is $65,000. What is the indicated value?
- A Minnesota appraiser is adjusting comparables for a swimming pool that the subject property has but the comparables do not. The appraiser adds $15,000 to each comparable. This makes the comparables:
- A Minnesota appraiser is valuing a property that has been impacted by a nuisance (loud neighboring business). How is this reflected in the appraisal?
- A Minnesota appraiser determines a property's gross rent multiplier (GRM) is 120. The property generates $1,500/month in rent. What is the estimated value?
- A Minnesota rental property has potential gross income of $96,000, vacancy and credit loss of 5%, and operating expenses of $32,000. What is the NOI?
- The principle of progression holds that:
- External obsolescence in real estate refers to depreciation caused by:
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