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Net Income Multiplier - NIM |
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The Net Income Multiplier or NIM is a factor that is used to estimate
the market value of income producing properties. It is equal to the
market value of a property divided by the net operating income or NOI.
Example 1: A residential income property has an NOI of $15,000 and
a market value of $150,000. |
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Market Value $150,000 |
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NIM
= ------------------------------ = ------------ = 10 |
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Net Operating Income $15,000 |
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Example 2: The average net income multiplier for recent sales
of comparable properties in a particular area is 9 and the net
operating income for a similar property we are considering buying is
$20,000. |
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Market Value
= NIM X NOI = 9 X $20,000 = $180,000 |
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Both the net income multiplier and the cap rate are financial tools used
to estimate the market value of income properties. The cap
rate is better known and more widely used. The cap rate and
the NIM produce
identical results when estimating the market value of an income property
since the net income multiplier is the inverse of the cap rate.
The cap rate is equal to 100 divided by the NIM. |
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100 100 |
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Cap
Rate = -------- NIM = ------------- |
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NIM Cap Rate |
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When using the capitalization rate and the net income multiplier to
estimate the value of an income property, accurate and current
financial data for comparable sales of similar properties is
required. Because some investors prefer to use the Net Income
Multiplier over the Cap Rate, it is included in the On Target real
estate investment software. The Ratio Analysis report includes
many other important real estate investment ratios in addition to
the NIM. You can choose which
investment ratios that you find most important. A lot of time went
into the design and organization of the On Target input screens,
reports and graphics. The On Target software was designed to
allow the real estate investor to quickly size up an income
property. If you are interested in purchasing On Target for just
$97.95 , click on Purchase
Software
For more information, go to
Software Features
The On Target real estate software includes a 30
day money back guarantee and free support.
(c) Copyright 2000 - 2008 Advantage
Software LLC
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