Valuation & AppraisalQuestion 102 of 120
The 'gross rent multiplier' (GRM) is calculated by:
a.Multiplying net income by the cap rate
b.Dividing the loan amount by the down payment
c.Subtracting expenses from the sale price
d.Dividing the sale price by the gross rental income
Explanation
The gross rent multiplier is found by dividing a property's price by its gross rental income, giving a quick relationship between price and rent. It is a simple screening tool for income properties, often using monthly or annual rent. Unlike the cap rate, it does not account for operating expenses.
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