California Real Estate SalespersonProperty Valuation and Financial AnalysisEasy
A single-family home recently sold for $240,000. Comparable rental data shows similar homes rent for $2,000 per month. What is the Gross Rent Multiplier (GRM) for this property?
- A150
- B96
- C100
- D120
Show answer & explanationAnswer & explanation
Correct answer: D. 120
GRM = Sale Price ÷ Monthly Rent = $240,000 ÷ $2,000 = 120. GRM is used with market rent to estimate a property's value.
Why the other options are wrong
- A. Would result from dividing by $1,600, not the given rent.
- B. Would result from dividing by a rent figure higher than $2,000.
- C. Would result from dividing by $2,400, not the given rent.
Gross Rent Multiplier (GRM)
A ratio used to estimate a property's value or reasonableness of price based on its rental income, calculated as Sale Price divided by Monthly (or Annual) Rent.
- Formula: GRM = Sale Price ÷ Gross Monthly Rent
- Used mainly for residential income comparisons
- Lower GRM generally means a better price relative to rent produced
Memory trick: Price over Rent gives you the GRM percent... no, just divide!