Property Valuation
Gross Rent Multiplier (GRM) is calculated by:
ADividing net operating income by the capitalization rate
BDividing the sale price by the gross monthly (or annual) rent✓ Correct
CMultiplying the sale price by the vacancy rate
DDividing effective gross income by operating expenses
Explanation
GRM = Sale Price ÷ Gross Monthly (or Annual) Rent. For example, if a property sells for $180,000 and generates $1,500/month gross rent, GRM = $180,000 ÷ $1,500 = 120. GRM is a quick but less precise valuation tool than the income capitalization approach.
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