Real Estate Math
A Michigan duplex has two units, each renting for $1,100/month. Using a GRM of 150, what is the estimated value?
A$165,000
B$330,000✓ Correct
C$165,000 per unit
D$396,000
Explanation
Total monthly rent: 2 × $1,100 = $2,200. Value = GRM × Monthly Rent = 150 × $2,200 = $330,000.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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