Tennessee Realtor State Practice Exam

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Prepare for the Tennessee Realtor State Exam with questions and explanations designed to help you succeed. Master the principles and regulations of real estate in Tennessee. Ace your exam with confidence!

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If a 20-unit apartment building sells for $5 million with an annual gross income of $400,000, what is the gross income multiplier (GIM)?

10
12.5
15
20

The correct answer is: 12.5

To determine the Gross Income Multiplier (GIM) for an investment property, you divide the Sale Price by the Gross Annual Income. In this case, the apartment building sells for $5 million, and its annual gross income is $400,000. The calculation is as follows: Gross Income Multiplier (GIM) = Sale Price ÷ Gross Annual Income GIM = $5,000,000 ÷ $400,000 GIM = 12.5 This means that the GIM is 12.5. The GIM is a useful metric for investors as it helps evaluate the relationship between the property's price and its income-generating potential. It allows for quick comparisons with other properties in determining if an investment is reasonable based on income relative to price. The GIM of 12.5 signifies that the property is valued at 12.5 times its annual income, which can assist in analyzing investment opportunities in real estate.