Subject annual gross rent is $180,000. A supported gross-rent multiplier range of 8.5 to 9.2 is explicitly defined on that same annual income basis. With no other adjustments, what value range results?
Correct Answer
A) $1,530,000 to $1,656,000
Multiply the same-period gross rent by each endpoint: $180,000 × 8.5 = $1,530,000 and $180,000 × 9.2 = $1,656,000. The multiplier period is expressly specified; its magnitude alone never proves that it is monthly or annual.
Why This Is the Correct Answer
Option A is correct because $180,000 x 8.5 = $1,530,000 and $180,000 x 9.2 = $1,656,000. The multiplier range is expressly on the same annual basis as the rent. No period conversion or other adjustment is called for.
Why the Other Options Are Wrong
Option B: $18,360,000 to $19,872,000
Option B, $18,360,000 to $19,872,000, comes from multiplying the already annual rent by 12 before applying the multipliers: $180,000 x 12 x 8.5 = $18,360,000 and $180,000 x 12 x 9.2 = $19,872,000. The rent is already annual, so the range is $1,530,000 to $1,656,000.
Option C: $19,565 to $21,176
Option C, $19,565 to $21,176, comes from dividing the rent by the multipliers ($180,000 / 9.2 = $19,565 and $180,000 / 8.5 = $21,176) instead of multiplying. Value equals rent times the multiplier, giving $1,530,000 to $1,656,000.
Option D: $127,500 to $138,000
Option D, $127,500 to $138,000, comes from dividing the annual rent by 12 before applying the multipliers: $180,000 / 12 x 8.5 = $127,500 and $180,000 / 12 x 9.2 = $138,000. The multipliers are annual-basis, so the range is $1,530,000 to $1,656,000.
Endpoint times income, twice
For a multiplier range, multiply the income by the low end and then by the high end.
How to use: Use this to produce a value range quickly from a supported multiplier range.
Exam Tip
Do not convert periods when the stem states the multiplier and income share a basis. Value is income times the multiplier, so a range smaller than the rent itself signals a division error.
Common Mistakes to Avoid
- -Converting annual rent to monthly, or annualizing it a second time, when the multiplier is annual
- -Dividing the income by the multiplier instead of multiplying
- -Assuming a small multiplier must be annual or a large one monthly without checking the stated basis
Concept Deep Dive
Analysis
This question tests applying a multiplier range to income on the same basis. Both the $180,000 rent and the 8.5 to 9.2 range are annual. Multiply the rent by each endpoint to get the value range, with no period conversion and no inversion of the formula.
Background Knowledge
Multipliers are applied to the same level and period of income from which they were derived. When a range of supported multipliers exists, applying each endpoint produces a value range for reconciliation. The size of a multiplier alone does not establish whether it is monthly or annual; the basis must be stated.
Real-World Application
An appraiser extracts annual gross income multipliers of 8.5 to 9.2 from comparable small apartment sales. Applied to the subject's $180,000 annual gross rent, they bracket value between $1,530,000 and $1,656,000 before reconciliation.
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Subject monthly gross rent is $8,000. A supported gross-rent multiplier range of 110 to 130 is explicitly defined on that same monthly income basis. With no other adjustments, what value range results?