Monthly gross rent is $4,200. A supported monthly-basis GRM range is 142 to 156, with no other adjustments. What is the lower endpoint of the value range?
Correct Answer
A) $596,400
The lower endpoint is $4,200×142=$596,400; the upper endpoint is $4,200×156=$655,200. These are capital values, not annual receipts. The monthly multiplier basis is expressly supplied. Common errors: reporting the upper endpoint instead of the lower gives $655,200; applying the monthly multiplier to annual rent gives $7,156,800; using the midpoint of the multiplier range gives $625,800.
Why This Is the Correct Answer
Option A is correct because the lower endpoint is $4,200 × 142 = $596,400. The upper endpoint is $4,200 × 156 = $655,200. A monthly multiplier is applied to monthly rent, matching the basis from which it was derived.
Why the Other Options Are Wrong
Option B: $625,800
Option B, $625,800, uses the midpoint of the multiplier range: $4,200 × (142 + 156) ÷ 2 = $4,200 × 149 = $625,800. The question asks for the lower endpoint, $4,200 × 142 = $596,400.
Option C: $655,200
Option C, $655,200, is the upper endpoint: $4,200 × 156 = $655,200. The lower endpoint uses 142, giving $596,400.
Option D: $7,156,800
Option D, $7,156,800, applies the monthly multiplier to annual rent: $4,200 × 12 × 142 = $7,156,800. A monthly GRM goes with monthly rent: $4,200 × 142 = $596,400.
Monthly with monthly
A monthly GRM is a count of months of rent. Multiply it by one month's rent, not by a year's rent.
How to use: Use this to keep the rent period consistent with the multiplier period.
Exam Tip
Read which end of the range is asked for; lower endpoint means the lower multiplier.
Common Mistakes to Avoid
- -Applying a monthly GRM to annual rent
- -Reporting the upper endpoint when the lower is asked
- -Using the midpoint of a range when an endpoint is requested
Concept Deep Dive
Analysis
This question tests applying a monthly GRM range to monthly rent and picking the lower endpoint. Because the multiplier is monthly, it is applied to monthly rent, and the lower endpoint uses the lower multiplier of 142. The distractors use the upper endpoint, the midpoint or annual rent.
Background Knowledge
A gross rent multiplier is applied to the same level and period of income from which it was derived. Residential appraisal forms commonly express it as estimated monthly market rent times the GRM. A range of supported multipliers produces a range of value indications.
Real-World Application
An appraiser completing a single-family rental report extracts monthly GRMs from several rented comparable sales, then multiplies the subject's monthly market rent by the low and high multipliers to bracket the income-approach value.
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