Real Estate Math
A Florida investor purchases a duplex for $280,000 and rents each unit for $1,200/month. The gross rent multiplier (GRM) is:
A9.72
B116.7✓ Correct
C11.67
D97.2
Explanation
Annual gross rent = 2 units × $1,200 × 12 = $28,800. GRM = Purchase Price ÷ Annual Gross Rent = $280,000 ÷ $28,800 ≈ 9.
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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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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