The gross income multiplier (GIM) can be very useful as an additional valuation method. Gross income multipliers are most reliable when the subject has similar income sources and a similar expense ratio as the comparable sales. Due to the shortage of golf course sales, selecting comparables with similar attributes as the subject is not always possible. As using multipliers have their limitations, they are not recommended as method of establishing assessed values. The approach is most useful in providing secondary support, or as a cross check, for the value established through Direct Capitalization or the Cost Approach.
Deriving a gross income multiplier involves dividing the sale price of a golf course by the gross income estimate developed by the method detailed in Section 9.6. Once the multiplier has been derived from sales it must be applied on the same basis it was derived.
Gross Income Multiplier: |
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Sale Price / |
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Gross Income |
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Example: |
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$3,800,000 / |
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3.6 |
$1,050,000 |
Once established, the gross income multiplier of the sales can be multiplied by the indicated multiplier of the property being valued to produce a market value range. Factors such as quality of clubhouse and amount of non-golf related revenue can impact the GIM indicated by individual sales.
The use of a gross income multiplier is explored further in the Income Approach Valuation example in the Addenda of this guide.
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