George Hatch
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified General Appraiser
- State
- California
GIMs are more useful when the properties are under similar rental terms and have similar expense loads. It works okay on small to medium sized apartment properties because there generally aren't any leases (everything is month-month) to mess up the investor's expectations, and because when the comps are of comparable age and condition they tend to have comparable expense loads.
In non-res appraising I tend to use the GIM in the Sales Comparison if I use it at all. I cap the NOI and sometimes use a DCF in the Income Approach because the range of relationships between income and value tend to be a lot more narrow at the NOI level.
A GIM is an income technique but it is useful as a unit of comparison to the extent the markets use it that way. Really, a cap rate can be considered a unit of comparison, too. It measures the relationship between NOI and value. We use it as a unit of comparison in the Income Approach. Where it becomes independent from the Sales Comparison is to the extent that in addition to extraction from the direct comparables, a cap rate can be "built" using one of the residual techniques or extracted from sources other than the direct comparables.
In non-res appraising I tend to use the GIM in the Sales Comparison if I use it at all. I cap the NOI and sometimes use a DCF in the Income Approach because the range of relationships between income and value tend to be a lot more narrow at the NOI level.
A GIM is an income technique but it is useful as a unit of comparison to the extent the markets use it that way. Really, a cap rate can be considered a unit of comparison, too. It measures the relationship between NOI and value. We use it as a unit of comparison in the Income Approach. Where it becomes independent from the Sales Comparison is to the extent that in addition to extraction from the direct comparables, a cap rate can be "built" using one of the residual techniques or extracted from sources other than the direct comparables.