When applying the Gross Rent Multiplier to a one-to-four-family residential property, which rent figure is used?

• A. Annual rent
• B. Monthly
• C. Weekly
• D. Daily

Answer: (B)

GRM is calculated by dividing the property’s sale price by its gross monthly rent. Using monthly rent keeps the units consistent and gives a straightforward multiplier that can be applied across similar properties. If you used annual rent, you’d be doing a different metric (a gross income multiplier) and you’d have to convert back to monthly to compare GRMs. So, the rent figure used for this approach is the monthly rent. For example, a $240,000 property with $2,000 gross monthly rent yields a GRM of 120. Weekly or daily rents aren’t the standard for GRM, and using annual rent would create a different multiplier altogether.