Property Valuation
What is the effective gross income (EGI) multiplier (EGIM) approach to value?
AValue = EGI × EGIM, where EGIM is derived from comparable sales✓ Correct
BValue = Potential Gross Income ÷ Vacancy Rate
CValue = NOI × EGIM
DValue = EGI ÷ Cap Rate
Explanation
The Effective Gross Income Multiplier (EGIM) is similar to the GRM: Value = EGI × EGIM. The EGIM accounts for vacancy and collection losses (unlike the GRM which uses potential gross income). Appraisers derive the EGIM from comparable sales by dividing sale prices by their EGIs. The EGIM approach is a quick valuation tool but less precise than the full income capitalization approach using NOI and cap rates.
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