Question

An appraiser has been hired to prepare an appraisal on a property that includes an elegant old mansion that is now used as an insurance company office. Which approach to value would the appraiser rely on most?

a. replacement cost approach
b. sales compariosn approach
c. gross rent multiplier approach
d. income approach

Answer 1

c. gross rent multiplier approach

Step-by-step explanation:

Gross Rent Multiplier (GRM) is the cost ratio of an investment in immovable property to its annual rental income before paying for costs such as property taxes, insurance and utilities. It is the number of years that the estate will take to pay itself in gross rent.

Simply multiply the Gross Rent Multiplier (GRM) by the gross rents of the property to calculate the value of a commercial property using the Gross Rent Multiplier valuation approach.

Divide the selling price or value of an estate by the gross rents of the land of the subject to determine the Gross Rent Multiplier.