Are you using a GROSS INCOME multiplier (GIM) or an EFFECTIVE GROSS multiplier (EGIM)? If you are talking residential and using monthly not annual income, then the GRM (Gross Rent Multipler) is a GROSS INCOME multiplier.
Typically a GIM would be used if you have little or no information about the actual expenses of the comparbles. Otherwise, you would develop an estimate of expenses and develop a NET OPERATING INCOME (NOI) for the subject and comparables. Then you would capitalize it into a value
Income = $50,000
Expense Ratio 50%
NOI = $25,000
Cap Rate (from calculating comparable sales) 12%
IRV = Value = 25,000 ÷ 12% = 208,333
(12% reciprocal = 8.33 and the above can be stated as 25,000 x 8.33)
Generally, however GIM are stated as multiplier numbers and cap rate/ NOI relationships as percentage which has to be divided into the NOI.
When using Multipliers rather than rates you would be using VIF rather than IRV.
The 'F' is a factor rather than a rate. ('Factor' and 'Multiplier' are synonymous)
The income may be either EGI or PGI. The key here is to not interchange them - be consistent....either use ALL EGI's or ALL PGI's.
The resultant 'Factor' is known as a PGIM or an EGIM
What's the old phrase you show me vacancy, expense, income, and sale price and I'll show you a 100 different cap rates. Reflecting there is no standard...one of my favorite cliche expenses that never shows up in the real world is replacement reserves. Yet most banks fight tooth and nail to have that in the appraisal...when 100% of my data never has it included in their expenses when they sell. But that recon. is for another forum for another time, or is it....
We too have a bank clients that requires replacement reserves. One even told us to reduce the cap rates we extracted from the market to adjust for the differece. Of course now that the market is soft they want to see higher cap rates than the market uses. We just can't seem to win. :Eyecrazy: