Property Valuation
The income approach uses a gross rent multiplier (GRM) to estimate value. A property has monthly rent of $1,500 and comparable GRM is 120. The estimated value is:
A$150,000
B$180,000✓ Correct
C$200,000
D$225,000
Explanation
Value = Monthly Rent × GRM = $1,500 × 120 = $180,000. Using the values given ($1,500), apply the appropriate formula..
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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
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