Effective Gross Income Multiplier [3031]

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An apartment building has 20 units that rent for $500 monthly and 30 units that rent for $750 monthly.  Collection loss is estimated at 3% and vacancy loss is estimated at 7%.  The effective gross income multiplier for similar buildings is 8.

What is the estimated value of the building?

 

Solution

Units

Rent x 12

Total

20

$6,000

$120,000

30

$9,000

$270,000

Total Rent

 

$390,000

Less:  Allowances @10%

$39,000

Effective Gross Income

$351,000

EGI Multiplier

8

Value

 

$2,808,000

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