Question

An appraiser estimates the market value of small income-producing property using the income approach and income...

An appraiser estimates the market value of small income-producing property using the income approach and income multiplier method. The appraiser estimates the following information:

  • Potential Gross Income = $225,000
  • Vacancy and collections losses = 8%
  • Miscellaneous Income = $13,000
  • Effective Gross Income Multiplier (EGIM) = 5.5

What is the indicated value of this property?

Answers are rounded to the nearest thousands.

$ A. 1,067,000
B.

$ 1,328,000
C

$ 1,287,000
D

$ 1,210,000
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Answer #1

Please find the below explanation and “ Don’t forget to give a like! Thank you”

Calculation of effective gross income:

potential gross income = $225000

less: vacancy and collection losses = $18000

( $225000 * 8%)         

$207000

Add: miscellaneous income     =   $13000

Effective gross income = $220000

  Effective gross income is $220000

Indicated value of property = Effective gross income * Effective gross income multiplier (EGIM)

= $220000 * 5.5

= $1210000

The indicated value of property is $1210000.

So, the answer is D $1210000

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