Subject monthly gross rent is $8,000. A supported gross-rent multiplier range of 110 to 130 is explicitly defined on that same monthly income basis. With no other adjustments, what value range results?
Correct Answer
A) $880,000 to $1,040,000
Multiply the same-period gross rent by each endpoint: $8,000 × 110 = $880,000 and $8,000 × 130 = $1,040,000. The multiplier period is expressly specified; its magnitude alone never proves that it is monthly or annual.
Why This Is the Correct Answer
Option A is correct because $8,000 x 110 = $880,000 and $8,000 x 130 = $1,040,000. The multiplier range is explicitly on the same monthly basis as the subject rent. With no other adjustments, these products define the range.
Why the Other Options Are Wrong
Option B: $10,560,000 to $12,480,000
Option B, $10,560,000 to $12,480,000, comes from annualizing the rent before applying the monthly multipliers: $8,000 x 12 x 110 = $10,560,000 and $8,000 x 12 x 130 = $12,480,000. A monthly GRM is applied to monthly rent, giving $880,000 to $1,040,000.
Option C: $8,800 to $10,400
Option C, $8,800 to $10,400, comes from reading the multipliers as percentages: $8,000 x 1.10 = $8,800 and $8,000 x 1.30 = $10,400. A GRM is a factor, so the range is $8,000 x 110 = $880,000 to $8,000 x 130 = $1,040,000.
Option D: $73,333 to $86,667
Option D, $73,333 to $86,667, comes from dividing the monthly rent by 12 before applying the multipliers: $8,000 / 12 x 110 = $73,333 and $8,000 / 12 x 130 = $86,667. The rent is already monthly, so the range is $880,000 to $1,040,000.
Monthly GRM, monthly rent
A monthly GRM pairs with monthly rent, so multiply directly without dividing or annualizing.
How to use: Use this pairing to avoid unnecessary period conversions.
Exam Tip
When the stem says the multiplier is on the same basis as the rent, multiply directly. Answers far too large usually come from annualizing the rent, and answers far too small from dividing by 12 or treating the multiplier as a percentage.
Common Mistakes to Avoid
- -Dividing monthly rent by 12
- -Applying a monthly GRM to annual rent
- -Treating the multiplier as a percentage instead of a factor
Concept Deep Dive
Analysis
This question tests applying a monthly gross rent multiplier range. Both the $8,000 rent and the 110 to 130 range are on a monthly basis. Multiply the rent by each endpoint to get the value range, without converting the rent to another period.
Background Knowledge
Monthly gross rent multipliers are applied to monthly rent, and annual multipliers to annual income. A supported range of multipliers yields a range of value indications for reconciliation. The stated basis, not the multiplier's size, determines the period.
Real-World Application
An appraiser values a fourplex renting for $8,000 a month and finds monthly GRMs of 110 to 130 from comparable sales. The resulting $880,000 to $1,040,000 range is reconciled with the sales comparison approach.
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Subject annual gross rent is $180,000. A supported gross-rent multiplier range of 8.5 to 9.2 is explicitly defined on that same annual income basis. With no other adjustments, what value range results?
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Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?