Gross Rent Multiplier (GRM) is used in financing analysis as a quick metric.

Gross Rent Multiplier (GRM) is used in financing analysis as a quick metric.

• A. To determine the loan's interest rate.
• B. To calculate the annual net operating income.
• C. GRM equals property price divided by gross annual rent; used as a quick metric to compare investment properties.
• D. To assess the property's liquidity.

Answer: (C)

Gross Rent Multiplier is a quick comparison tool in real estate finance. It shows how much you’re paying for a property relative to the gross income it can generate from rents before expenses. The key idea is to use a simple ratio to screen properties quickly. The basic formula is property price divided by gross annual rent. This creates a simple metric you can use to compare different investment properties side by side. A lower GRM generally indicates that, relative to rent, you’re paying less for the property, making it more attractive as a quick screen. Keep in mind GRM uses gross rent and ignores operating expenses, vacancies, maintenance, taxes, insurance, and financing costs. Because of that, it doesn’t measure cash flow or profitability, nor does it tell you anything about loan terms or liquidity. It’s best used for rapid comparisons, not for final investment decisions.

Gross Rent Multiplier is a quick comparison tool in real estate finance. It shows how much you’re paying for a property relative to the gross income it can generate from rents before expenses. The key idea is to use a simple ratio to screen properties quickly.

The basic formula is property price divided by gross annual rent. This creates a simple metric you can use to compare different investment properties side by side. A lower GRM generally indicates that, relative to rent, you’re paying less for the property, making it more attractive as a quick screen.

Keep in mind GRM uses gross rent and ignores operating expenses, vacancies, maintenance, taxes, insurance, and financing costs. Because of that, it doesn’t measure cash flow or profitability, nor does it tell you anything about loan terms or liquidity. It’s best used for rapid comparisons, not for final investment decisions.