Property Valuation
In Texas, the 'income multiplier' approach (such as the GRM) differs from the capitalization approach in that:
AThe income multiplier is more accurate for all property types
BThe income multiplier uses gross income without adjusting for expenses, while the capitalization approach uses NOI (net of expenses)✓ Correct
CThe capitalization approach is used only for residential properties
DThe income multiplier is set by TCEQ
Explanation
The Gross Rent Multiplier (GRM) or Gross Income Multiplier (GIM) divides the sale price by the gross annual income without considering vacancy, operating expenses, or NOI. It is a quick, rough valuation tool. The direct capitalization approach uses NOI (which accounts for vacancy and operating expenses), making it a more refined income approach.
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