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A property's gross monthly rent is $2,000. Its gross rent multiplier (GRM) in the market is 150. What is the estimated property value using the GRM method?

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Correct answer

$300,000

  1. A $150,000
  2. B $240,000
  3. C $300,000
  4. D $3,000,000

Why this is the answer

GRM (Gross Rent Multiplier) method: Property Value = Gross Monthly Rent × GRM. So $2,000 × 150 = $300,000. The GRM is a quick approximation used for small income properties. It is a ratio derived from comparable sales in the market: take recent sale price ÷ monthly rent for several comparables to find typical GRMs. A higher GRM means properties are selling for more relative to their rent; lower GRM means rents are higher relative to price. GRM ignores expenses, vacancy, and financing — it is a back-of-envelope tool, not a full investment analysis. For more rigorous valuation of income property, appraisers use the income capitalization approach with NOI (Net Operating Income) and a cap rate.
Source: Real Estate Math, Gross Rent Multiplier

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About this topic: Real Estate Math

Commission splits, interest calculations, down payments, and the gross rent multiplier appear on every real estate exam. This is one of 8 Salesperson (National) questions on real estate math, each with a full explanation on a single study page.

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