Property Valuation
In the income approach, the Gross Rent Multiplier (GRM) is calculated by dividing:
AAnnual NOI by the cap rate
BSale price by the gross monthly rent✓ Correct
CGross rent by vacancy loss
DNet income by gross income
Explanation
GRM = Sale Price ÷ Gross Monthly Rent. It is a simple measure used for quick comparison of rental properties.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
ZoningLocal government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
VarianceOfficial permission to use land in a way that does not conform to the applicable zoning ordinance, granted by a zoning board when strict enforcement would cause undue hardship.
Eminent DomainThe power of government to take private property for public use, with the requirement to pay the owner just compensation.
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