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Valuation and Analysis, 14% of the examination

Gross rent multiplier (GRM)

Sale price divided by gross income, used as a quick comparison measure.

The GRM uses GROSS income, never net, which is the distinction most missed questions in this topic turn on. A monthly GRM is calculated against monthly rent, and mixing an annual price with a monthly rent produces a figure roughly twelve times too large.

See also

Capitalization rateThe rate of return used to convert net operating income into value.Net operating income (NOI)Effective gross income less operating expenses, before debt service and before depreciation.

See it in a question

One question from Valuation and Analysis, so the term lands in the context the exam uses it in.

Valuation and Analysis ยท 14%Methods of Estimating Value

An appraiser values a 40-year-old single-family home in an established neighbourhood with many recent sales. Which approach carries the most weight?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Property Valuation and Financial AnalysisThree short sub-topics carrying fourteen percent, and most of the arithmetic on the exam. The three approaches to value, and the income analysis that turns a rent roll into a number.14%Practise Valuation and Analysis28 questions on this area, every option explained.Practice

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