Determining the gross income multiplier


You are considering purchasing an office building for $2,500,000. You expect the potential gross income (PGI) in the first year to be $450,000; vacancy and collection losses to be 9 percent of PGI; and operating expenses to be 42 percent of effective gross income (EGI). What is the estimated Net Operating Income? Using the selling price, what is the implied first year overall capitalization rate? What is the (effective) gross income multiplier?

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Finance Basics: Determining the gross income multiplier
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