What does the Gross Rent Multiplier (GRM) calculate?

The Gross Rent Multiplier (GRM) is a tool used in real estate to assess the value of an income-generating property based on the rental income it produces. It is calculated by dividing the property’s sale price by its gross rental income. Therefore, when you apply GRM, you can estimate the property's value by multiplying its expected gross rental income by a GRM that is relevant to the local market or property type. This method provides a quick way to analyze potential investment properties, making it particularly useful for real estate investors looking to gauge rental opportunities in a straightforward manner.

The other options do not accurately represent what GRM measures. For example, while estimated property taxes relate to the local tax assessment of a property, they are not calculated using rental income. Similarly, utility costs concern the ongoing expenses for energy and water services, and while understanding these is important in property management, they are unrelated to the property valuation process via GRM. Comparative value assessments of neighborhood properties focus on analyzing the selling prices or values of similar homes in a certain area rather than on their rental income.