Property Valuation
What is the 'gross rent multiplier' (GRM) method of property valuation?
AMultiplying the property's net operating income by the cap rate
BDividing the property's sale price by its monthly (or annual) gross rental income to derive a multiplier used to estimate value✓ Correct
CMultiplying the gross square footage by the local price per square foot
DCalculating the gross profit from a property sale
Explanation
The Gross Rent Multiplier (GRM) = Sale Price ÷ Gross Rent. To estimate value, multiply GRM × subject property's gross rent.
People Also Study
Related Delaware Questions
- In Delaware, if a capitalization rate is 8% and a property's net operating income is $40,000, what is the estimated value using the income approach?Property Valuation
- The income capitalization approach to value is most appropriate for:Property Valuation
- In an appraisal, what is an 'adjustment' in the sales comparison approach?Property Valuation
- How many acres is a lot that measures 30,000 square feet? (1 acre = 43,560 sq ft)Real Estate Math
- Delaware real estate license law requires that the employing broker maintain how many years of transaction records?Delaware License Law
- What is the purpose of the Delaware Seller Disclosure of Real Property Condition Act?Delaware License Law
- Which of the following is a legal obligation of a Delaware licensee acting as a transaction broker (facilitator)?Agency
- A Delaware property has a potential gross income of $72,000, a vacancy rate of 5%, and annual operating expenses of $28,000. What is the net operating income (NOI)?Real Estate Math
Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Math Concepts
Study This Topic
Practice More Delaware Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Delaware Quiz →