Property Valuation
A property's gross rent multiplier (GRM) is calculated by dividing:
ANet operating income by cap rate
BSales price by gross monthly rent✓ Correct
CAnnual income by vacancy rate
DAssessed value by market value
Explanation
GRM = Sales price ÷ Gross monthly rent. It is a quick valuation tool for income properties, though it does not account for expenses.
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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.
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.
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