Question

Which is an example of the Gross Rent Multiplier? 1. Annual Rental Income of $80,000 and a sales price of $640,000 = 8 GRM 2. Net Income of $12,000 and a sales price of $190,000 = 15.833 GRM 3. Gross Rental Income of $12,000 per year and an assessed value of $200,000 = 16.67 GRM 4. Both #1 and #2 are correct

Answer 1

The correct example of the Gross Rent Multiplier is the first option, where the annual rental income of $80,000 divided by a sales price of $640,000 equals an 8 GRM.

Step-by-step explanation:

An example of the Gross Rent Multiplier (GRM) is the annual rental income divided by the property's sales price to determine how many years it will take for the investment to pay for itself in gross received rent. Among the options provided, the first one is a correct representation of the GRM:

1. Annual Rental Income of $80,000 and a sales price of $640,000 = 8 GRM

This is calculated by dividing the annual rental income by the sales price of the property. The other examples provided either use net income instead of the gross rental income or assess the value instead of the sales price, which doesn't conform to the standard GRM formula.

Option 1 is the example of the Gross Rent Multiplier (GRM) because it provides the annual rental income and the sales price. To calculate the GRM, you divide the sales price by the annual rental income. In this case, $640,000 divided by $80,000 equals 8 GRM.