California Real Estate Practice Exam

An appraiser evaluated a building and reported that the $2,500 per month income was in line with other comparable properties in the area. Recent sales of some of those comparable properties brought $350,000. What monthly gross multiplier would the appraiser use in further evaluations?

1. 130

2. 140

3. 150

4. None of the above

The correct answer is: 130

To determine the appropriate monthly gross multiplier, the first step is to understand what a gross monthly multiplier (GMM) is and how it is calculated. The GMM is a number used to estimate the value of an income-producing property based on its gross rental income. It is derived from the formula: GMM = Sales Price / Monthly Income In this scenario, the appraiser noted that comparable properties were selling for around $350,000, and the reported income for the building in question is $2,500 per month. Using the information provided, the monthly gross multiplier can be calculated as follows: GMM = $350,000 / $2,500 Calculating this gives: GMM = 140 This result indicates that a monthly gross multiplier of 140 is appropriate based on the sales price of comparable properties relative to their rental income. Therefore, when further evaluations are made, using a multiplier of 140 will align with the market conditions reflected in the recent sales data of the comparable properties. Thus, the answer reflecting the monthly gross multiplier that the appraiser would use in further evaluations is indeed 140, which clarifies the relationship between income and sales prices in that particular market.