Which method is appropriate for developing an overall capitalization rate when the effective gross income multiplier is known?

The appropriate method for developing an overall capitalization rate when the effective gross income multiplier is known is the Net Income Ratio Method. This method involves utilizing the net operating income of a property relative to its value. By understanding the effective gross income multiplier, you can convert the effective gross income into a value estimate, allowing for the calculation of the capitalization rate.

The Net Income Ratio Method stands out in this scenario because it directly relates to the income generated by the property, which is essential when the income multiplier is known. This method allows appraisers to analyze how much of the property’s income is generating value, thereby establishing a connection between revenue generation and property value.

In contrast, the Cost Approach Method focuses on the cost to replace or reproduce a property rather than its income potential. The Sales Comparison Method relies on analyzing comparable property sales, which doesn’t directly utilize income or the multiplier, making it less applicable here. The Income Approach Method, while also relevant to income generation, typically requires more detailed income and expense analyses rather than solely using an income multiplier.

Thus, using the Net Income Ratio Method provides a clear, efficient way to derive the overall capitalization rate from known effective gross income, making it the most suitable choice for the context provided.