How is the gross income multiplier (GIM) calculated for income properties?

The gross income multiplier (GIM) is a useful metric for evaluating income-producing properties. It is calculated by dividing the property's value by its effective gross income. This ratio provides investors with a quick way to assess the value of a property relative to the income it generates. By using this formula, an investor can gauge how many years it would take for the income from the property to pay back the investment, effectively serving as a shorthand for value assessment in the context of income generation.

Using GIM allows for comparative analysis between different properties, helping investors identify which properties might be undervalued or overvalued based on their income-producing potential. For instance, if two properties generate the same income but are priced differently, the GIM will reveal which one offers a better investment opportunity.

The other choices either involve incorrect calculations or refer to concepts that do not relate directly to the GIM formula, which is specifically concerned with the ratio of value to effective gross income.