A duplex rents for $1,650 per unit monthly. Comparable duplex sales show monthly GRMs near 150. The indicated value is:
Correct Answer
D) $495,000 from both units' rent
Why this is correct: The governing concept is that the Gross Rent Multiplier (GRM) method estimates value as monthly rent multiplied by the GRM. Here, total monthly rent for both units is $1,650 × 2 = $3,300. With a GRM of 150, indicated value is $3,300 × 150 = $495,000. Why the other choices are wrong: "$594,000 at an annual multiplier" is incorrect because using annual rent ($3,300 × 12 = $39,600) with a monthly GRM would be inconsistent. "$247,500 using one unit's rent" is incorrect because it omits the second unit's rent. "$412,500 at a conservative multiplier" is incorrect because it uses a GRM of 125, not 150, without justification. Exam tip: Ensure consistency between rent (monthly/annual) and multiplier (monthly/annual) in GRM calculations.
Why This Is the Correct Answer
Why this is correct: The governing concept is that the Gross Rent Multiplier (GRM) method estimates value as monthly rent multiplied by the GRM. Here, total monthly rent for both units is $1,650 × 2 = $3,300. With a GRM of 150, indicated value is $3,300 × 150 = $495,000. Why the other choices are wrong: "$594,000 at an annual multiplier" is incorrect because using annual rent ($3,300 × 12 = $39,600) with a monthly GRM would be inconsistent. "$247,500 using one unit's rent" is incorrect because it omits the second unit's rent. "$412,500 at a conservative multiplier" is incorrect because it uses a GRM of 125, not 150, without justification. Exam tip: Ensure consistency between rent (monthly/annual) and multiplier (monthly/annual) in GRM calculations.
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