25. When using a multiplier to establish a price for a commercial property, which of the following is taken into account?
Answer: C
Annual gross income of the property is taken into account when using a multiplier to establish a price for a commercial property.
The annual gross income of the property is a crucial factor considered when applying a multiplier to determine its price. This income reflects the property's revenue-generating potential and is essential for assessing its value in the commercial real estate market.
A) Property's operating expenses
While operating expenses are important for assessing the profitability of a property, they do not directly influence the multiplier used to establish the property's price. Instead, these expenses are usually subtracted from the gross income to determine net operating income, which is a separate consideration in property valuation.
B) Age of the property
The age of the property may affect its condition and marketability, but it is not a direct factor in establishing a price through a multiplier. Age can influence income potential and maintenance costs, yet it does not directly correlate with the income-based valuation approach.
C) Annual gross income of the property
This is the correct answer, as it directly impacts the multiplier used in price determination. A higher annual gross income typically leads to a higher property valuation, making it a key factor in the price-setting process for commercial properties.
D) Amount of deferred maintenance
Deferred maintenance can impact a property's value and attractiveness to buyers, but it is not a component of the multiplier used for price establishment. While it may affect future income and expenses, it does not factor into the calculation of the property's current pricing based on income.
Conclusion
The annual gross income of the property is the primary consideration when using a multiplier to establish its price, as it reflects the property's revenue potential. Other options, such as operating expenses, age, and deferred maintenance, play roles in different aspects of property valuation but do not directly influence the pricing multiplier. Therefore, option C is definitively the correct answer.