What does the gross rent multiplier (GRM) represent?

The gross rent multiplier (GRM) is a valuation tool used in real estate to assess the value of an income-generating property based on its rental income. The GRM is calculated by dividing the property's price by its gross annual rent.

When considering the mathematical relationships involved, the GRM can be applied in two primary ways to derive useful information about property values.

Firstly, multiplying the gross rent multiplier by the monthly rent gives an indication of the property's value when you know the income it generates. This relationship is expressed as the value being equal to the gross rent multiplier multiplied by the monthly rent.

Secondly, if the value of the property is known, you can use the GRM to find out the expected monthly rent. In this case, dividing the property's value by the gross rent multiplier gives you the monthly rent that corresponds to that value.

Thus, both of these mathematical expressions (the relationship between the GRM, monthly rental income, and property value) are correct and reflect how the GRM is utilized in real estate evaluations, making the choice that includes both of these formulas as the answer.