Question

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

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