Question

The sale price of a four unit residential property was $450,000. Each unit rents for $900 per month. Using the gross rent multiplier approach and the information provided, what would be the value of a similar building where each of the four units rents for $750 per month?

Answer 1

Using the gross rent multiplier approach, the value of a similar building where each unit rents for $750 per month is approximately $375,120.

Step-by-step explanation:

To determine the value of a similar building using the gross rent multiplier (GRM) approach, we need to calculate the GRM of the property that was sold for $450,000 first, and then apply it to the new rental income of the similar building.

The GRM is found by dividing the sale price of the property by its annual gross rental income:

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Now, we calculate the annual gross rent for the similar building:

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Using the GRM to find the value of the similar building:

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Therefore, using the gross rent multiplier approach, the value of a similar building where each of the four units rents for $750 per month is approximately $375,120.