Net Income Multiplier

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Net income multiplier is a financial tool that is used to estimate the Market value of income generating properties.

Jessica · Posted: Wed Nov 30, 2005 10:48 pm Post subject: RE:

Hi,

Helping User has given you a brief explanation on Net Income Multiplier (NIM).

NIM and Cap rate are both financial tools used for same purpose. But cap is better known and widely known. They both produce the same result when we estimate the market value of an income generating property. Since NIM is inverse of cap rate therefore NIM is equal to 100 divided by cap rate and cap rate is equal to 100 divided by NIM.

Accurate and current financial data of sale of comparable property is needed when we use Net Income Multiplier to estimate the market value of a income generating property.

Calculation of NIM has been explained below through an example.

A residential property in Idaho has a market value of $200000 and a net operating income of $ 20,000.

Net Income Multiplier	=	Market Value / Net Operating Income
	=	200000 / 20000
	=	10

Thanks,
Jessica

Guest 0.10 Dollars($)

Hi,

That is an informative post. But Jessica you have mentioned a term "Net Operating Income". What does this mean?

Ethan

Jessica · Posted: Thu Dec 01, 2005 8:55 pm Post subject: RE

Hi,

Welcome to the Forums.

Net operating income is the equal to properties gross income annually minus operating expenses.

Gross Income includes both rental income and other income like parking fee, Laundry and vending receipt etc. (All the income associated with the property). And operating expenses incurred for the operation and maintenance of the property like repairs, taxes, utilities etc.

Amortization of loan points, principle and interest, income taxes, depreciation, capital expenditure are not included in operating expenses.

Thanks,
Jessica

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