The Multiplier field in the Property Resale tab is determined by which formula?

In real estate valuation, the Multiplier field in the Property Resale tab is derived using the formula that involves the capitalization rate (Cap Rate). The correct option indicates that the multiplier is calculated by taking 1 divided by the Cap Rate.

This formula is fundamental in understanding how to express the relationship between income and value in property transactions. The Cap Rate represents the expected return on investment for a property, and by dividing 1 by the Cap Rate, investors can ascertain the property’s value based on its income-generating potential.

For instance, if a property has a Cap Rate of 10% (or 0.10), then using this formula, the multiplier would be 1 / 0.10 = 10. This multiplier indicates that for every dollar of net operating income (NOI), the property is valued at ten dollars.

This is essential for investors and appraisers, as it allows them to quickly estimate property values based on their income without needing to undertake complex calculations or market analyses. Understanding this relationship is crucial for effective property valuation and investment decision-making.