Advantage Software LLC What is the Net Income Multiplier and How is it Used?
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     Net Income Multiplier - NIM
 
 
 
The Net Income Multiplier or NIM is a ratio 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 net operating income of $15,000 and a market value of $150,000. 

 
                
 
                                                      Market Value                      $150,000
                           NIM  =      ------------------------------      =       ------------       =    10
                                              Net Operating Income                 $15,000
 
  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.  
                
 
 
 
 
                                Market Value  =  NIM   X   NOI   =    9    X   $20,000    =     $180,000
 
 
  Both the net income multiplier and the cap rate are financial tools that are used to estimate the market value of income properties.  The cap rate is better known and more widely used.  The cap rate and the net income multiplier 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.  
               
 
                                                     100                                              100
                          Cap Rate  =     --------                      NIM   =    ------------- 
                                                    NIM                                          Cap Rate
 
 
 
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 in a given area 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 net income multiplier.  You can choose which investment ratios that you feel are the 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 $99.95 , 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.

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