What is the formula for developing a gross income multiplier?

The gross income multiplier (GIM) is a useful metric in real estate appraisal that helps appraisers estimate the value of an income-producing property based on its gross income. The formula for GIM is derived from the relationship between the sales price of a property and its gross income.

To understand why the correct formula involves dividing the sales price by the gross income, consider that the GIM reflects how many times the gross income is represented in the sales price. This means if a property sells for a certain amount, dividing that amount by the annual income it generates gives the appraiser a multiplier that can be used to assess value of similar properties.

In practical terms, if a property generates a gross income of $50,000 and sells for $500,000, the GIM would be calculated as $500,000 divided by $50,000, resulting in a GIM of 10. This indicates that the property's value is 10 times its gross income, which can assist in estimating the value of other similar properties based on their respective income.

The other options do not accurately represent this relationship. For instance, the first option suggests multiplying the sales price by gross income, which does not yield a meaningful measure for valuation purposes. The second option