Cash-equivalent sale price is $396,000 and matching monthly gross rent is $2,200. What monthly gross-rent multiplier is price ÷ monthly rent?
Correct Answer
C) 180.0
396000÷2200 = 180. Common errors: computing the annual-basis multiplier instead of the monthly one gives 15.0; multiplying the monthly multiplier by 12 gives 2160.0; misplacing the decimal (dividing by 22,000) gives 18.0.
Why This Is the Correct Answer
Option C is correct because $396,000 ÷ $2,200 = 180.0. Price divided by matching monthly rent is the definition of the monthly gross rent multiplier.
Why the Other Options Are Wrong
Option A: 15.0
Option A, 15.0, is the annual-basis multiplier: $396,000 ÷ ($2,200 × 12) = 15.0. The question asks for the monthly GRM, which is $396,000 ÷ $2,200 = 180.0.
Option B: 18.0
Option B, 18.0, comes from misplacing the decimal and dividing by $22,000: $396,000 ÷ $22,000 = 18.0. Monthly rent is $2,200, giving 180.0.
Option D: 2160.0
Option D, 2160.0, results from multiplying the monthly multiplier by 12: $396,000 ÷ $2,200 × 12 = 2,160.0. The monthly GRM is $396,000 ÷ $2,200 = 180.0.
Price over rent, same period
GRM equals price divided by rent for the stated period; for monthly GRM, use monthly rent and expect a result in the hundreds.
How to use: Use this to set up any GRM extraction question.
Exam Tip
Estimate the answer roughly first (about $400,000 ÷ $2,000 = 200) to rule out answers off by a factor of 10 or 12.
Common Mistakes to Avoid
- -Dividing by annual rent for a monthly GRM
- -Dropping or adding a zero in the rent
- -Multiplying the GRM by 12
Concept Deep Dive
Analysis
This question tests extracting a monthly GRM by dividing sale price by monthly gross rent. Here that is $396,000 ÷ $2,200. Watch for choices that reflect annual rent, a decimal slip or an extra multiplication by 12.
Background Knowledge
A gross rent multiplier is derived from comparable sales by dividing price by gross rent for the same period. Residential appraisal forms use monthly market rent times GRM to produce the income approach indication. Consistency between the derivation basis and the application basis is essential.
Real-World Application
An appraiser valuing a rented single-family home gathers three comparable sales that were rented at the time of sale. The appraiser divides each sale price by its monthly rent to derive a supported GRM.
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Cash-equivalent sale price is $438,000 and matching monthly gross rent is $2,400. What monthly gross-rent multiplier is price ÷ monthly rent?
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