University of Central Florida (UCF) REE3043 Fundamentals of Real Estate Practice Exam 2

The Effective Gross Income Multiplier (EGIM) is a key metric used in real estate to determine the relationship between the sale price of a property and its effective gross income. The correct way to compute this value is by dividing the sale price by the effective gross income.

Using this formula, investors can assess how much they are paying for each dollar of income the property generates. This is particularly useful for evaluating investment properties, as it provides a quick way to compare different income-generating assets. A lower EGIM typically suggests a better investment, as it indicates a lower purchase price relative to income.

The other suggested formulas do not align with the financial analysis required for calculating the Effective Gross Income Multiplier. By understanding the logic behind the EGIM, investors can make more informed decisions based on income potential relative to property costs.