How Beneficial is the Gross Income Multiplier?

The gross income multiplier (GIM) is a fast and easy way to estimate the value of an income producing property. It should only be used as a first very basic reference, because it does not take into consideration the property's operating expenses.

Using the formula, you can quickly rank potential investment properties according to value. The GIM gives you a quick look at whether a property will remain profitable as conditions change. Let's take a deeper look at how beneficial the gross income multiplier really is.

What Is the Gross Income Multiplier?

Using the gross income multiplier, you can compare annual rental income to a property’s fair market value. The formula is simply a way to estimate a rental property value at a glance.

Real estate investors use the gross income multiplier for several reasons. First, the information to calculate the GIM is easily available. Second, it’s simple to do the calculation.

What Can the Gross Income Multiplier Do for Me?

Find the Gross Annual Rental Income

In order to calculate the gross income multiplier, you must know the property's gross income. To figure this out, you multiply the number of square feet by the rental rate per square foot. If the property is vacated, you must know the projected rent.

For a listed property, you will use the asking price as the property price. An easy way to find the sale's price of a property is to check on sites like Zillow or Redfin.

Determine the Property Price

The Gross Income Multiplier Formula

Once you've determined the gross annual rental income and the property price, you are ready to calculate the GIM. The formula for the gross income multiplier is simple:  Property Price / Gross Annual Rental Income = Gross Income Multiplier

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