Which statement best describes the Gross Income Multiplier?

• A. Net operating income is used
• B. It uses replacement cost data
• C. It relates gross income to sale price
• D. It uses cap rate to convert income to value

Answer: (C)

Gross Income Multiplier is a quick valuation tool that links price to what the property brings in before expenses. It’s a simple rule-of-thumb: take the sale price or market price and compare it to the property's annual gross income. The key idea is to express value as a multiple of gross income, without subtracting operating expenses. So, the multiplier equals price divided by gross income, and you can estimate value for another property by multiplying its gross income by that same multiplier.

This approach ignores expenses and financing, which is why it’s less precise than methods using net operating income and cap rates, but it’s useful for fast comparisons when detailed expense data isn’t available.

If you see a statement about Gross Income Multiplier, the best description is that it relates gross income to sale price.