Which of the following is the proper method for determining the gross income multiplier?

The proper method for determining the gross income multiplier is to divide annual income by sales price. This approach allows one to understand how many times the annual income is covered by the sales price of a property. The gross income multiplier provides a straightforward metric to evaluate the investment attractiveness of a property by comparing its income-generating potential to its market value.

By calculating the annual income and dividing it by the sales price, investors can gauge how effectively a property performs relative to its selling price. A lower multiplier indicates a better return on investment, while a higher multiplier suggests that the property may be overpriced in relation to its income-generating potential.

In other methodologies presented, dividing monthly income by sales price would yield a different perspective but does not align with the standard annual assessment typically used in real estate evaluations. Dividing sales price by gross income gives insight into the relationship in a different format, often used to express the inverse of the gross income multiplier. Finally, dividing assessed value by gross income does not provide a reliable method for this type of assessment, as assessed value may not accurately reflect the market value and thus skews the analysis.