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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 17Calculation 11: Net Income Multiplier

What It Means

Net income multiplier (NIM) is the reciprocal of the capitalization rate.

As with cap rate, you use this to express the relationship between a property’s value and its net operating income (NOI) for the current or coming year. NIM represents the amount that a typical investor would pay for each dollar of NOI.

Everything that was true about income capitalization as discussed in the previous chapter on capitalization rate is true about its cousin, NIM. Since you often want to use capitalization to estimate the value of a property, NIM provides a useful shortcut—the sort of thing for which the back of an envelope actually can be useful.

First, you establish what the prevailing cap rate ...

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