Property Valuation
A Washington appraiser uses the gross rent multiplier (GRM) method. A small rental property has a monthly rent of $2,500 and the GRM for the area is 150. The indicated value is:
A$300,000
B$375,000✓ Correct
C$400,000
D$450,000
Explanation
GRM Value = Monthly Rent × GRM = $2,500 × 150 = $375,000. The GRM is a quick income capitalization shortcut that multiplies monthly gross rent by the local market multiplier.
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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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