Tennessee Realtor State Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

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If a 20-unit apartment building sells for $5 million with an annual gross income of $400,000, what is the gross income multiplier (GIM)?

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12.5

To determine the Gross Income Multiplier (GIM) for an investment property, you divide the Sale Price by the Gross Annual Income.

In this case, the apartment building sells for $5 million, and its annual gross income is $400,000. The calculation is as follows:

Gross Income Multiplier (GIM) = Sale Price ÷ Gross Annual Income

GIM = $5,000,000 ÷ $400,000

GIM = 12.5

This means that the GIM is 12.5. The GIM is a useful metric for investors as it helps evaluate the relationship between the property's price and its income-generating potential. It allows for quick comparisons with other properties in determining if an investment is reasonable based on income relative to price. The GIM of 12.5 signifies that the property is valued at 12.5 times its annual income, which can assist in analyzing investment opportunities in real estate.

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