Property Valuation
In Maryland, the gross rent multiplier (GRM) is found by:
ADividing NOI by the cap rate
BDividing the sale price by monthly gross rent✓ Correct
CMultiplying annual rent by the vacancy rate
DDividing annual rent by the sale price
Explanation
GRM = Sale Price ÷ Monthly Gross Rent. It is a quick method to estimate value based on rental income.
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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