# How to Calculate a Gross Income Multiplier

The gross income multiplier, or GIM, offers an easy method of appraising investment or commercial properties using sales and rental figures. The strength of this calculation is in its simplicity, because it requires only two pieces of data to compare properties or extrapolate comparable property values. The weakness of the calculation is that the GIM doesn't consider a property's operating expenses, which means the projected value might not paint a true picture of overall value. Furthermore, if properties are dissimilar, the GIM may not offer a comparable metric.

## Gross Income Multiplier

The GIM is simply a ratio of property value to gross income. Typically, this calculation uses annual income and does not include expenses, such as utilities, licenses or maintenance. You can calculate the GIM on your own property, if you know the current value, or you can research current sales and rental histories from comparable properties. The resulting GIM enables you to extrapolate the value of your own property. Calculating the GIM requires that you divide the property value by the total income from the property, including rent, vending machines and services. As an example, if a $400,000 property produces $100,000 in total revenue, divide $400,000 by $100,000 to calculate the GIM of 4.

## Averaging GIM

If you're attempting to use a GIM to estimate another property's value, you should calculate the GIM of numerous comparable properties and take the average. Doing so equalizes the data, so you don't inadvertently use an unusually high or low GIM from an abnormal property. To calculate this average, add the GIM figures of each property and divide by the number of figures. As an example, if you calculated the GIM for four properties and got 4, 3.5, 6 and 4.5, add those figures together to get 18 and divide by 4. This calculates the average GIM of 4.5.

## Extrapolating Values

Armed with an average GIM, you can estimate the value of other properties, including those you own. You'll need to tabulate the total annual income, as you did before, and multiply the result by the GIM. Continuing with the example, if a property produces $120,000 per year, multiply $120,000 times 4.5 to estimate its value of $540,000. This figure should only be used as a precursor to a more comprehensive evaluation, but it's useful for a quick estimate.

## Similar Calculations

Several variations in the GIM calculation exist. One common variation is using the monthly income, which produces a higher GIM. You might consider this approach if monthly income is easier to calculate, but this figure will still produce a similar value. GIM can also use potential or effective figures. The former assumes the maximum amount of income the property can produce, but the latter takes into account lost income due to vacancy or remodeling. The gross rent multiplier, or GRM, is similar to GIM, except it only considers rent and omits other sources of income, such as vending and services.

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Writer Bio

C. Taylor embarked on a professional writing career in 2009 and frequently writes about technology, science, business, finance, martial arts and the great outdoors. He writes for both online and offline publications, including the Journal of Asian Martial Arts, Samsung, Radio Shack, Motley Fool, Chron, Synonym and more. He received a Master of Science degree in wildlife biology from Clemson University and a Bachelor of Arts in biological sciences at College of Charleston. He also holds minors in statistics, physics and visual arts.