Question 70

A salesperson listing a 100% rented 6-plex without expenses uses the gross rent multiplier (GRM).

The gross rent multiplier (GRM) is a financial metric used to evaluate the value of rental properties based on their gross rental income. In this case, since the property is fully rented and expenses are not factored in, the GRM provides a straightforward method to assess the property's worth.

A) net rent multiplier (NRM).

The net rent multiplier (NRM) is not applicable in this scenario as it factors in net income after expenses have been deducted. Since the question specifies that there are no expenses considered, the NRM would not be the correct choice for evaluating the property.

B) return on investment (ROI).

Return on investment (ROI) measures the profitability of an investment based on its net income relative to the cost of the investment. However, ROI requires knowledge of expenses and net income, which are not applicable in this case where only gross income is being considered.

C) gross rent multiplier (GRM).

The gross rent multiplier (GRM) is the appropriate metric in this scenario because it evaluates the value of the property based solely on the total rental income without accounting for expenses. This makes it ideal for a fully rented property like the 6-plex mentioned.

D) gross income multiplier (GIM).

The gross income multiplier (GIM) is similar to the GRM but includes all sources of income and not just rental income. Since the question focuses on a property that is 100% rented without expenses, the GIM is not the best fit compared to the more specific GRM.

Conclusion

The gross rent multiplier (GRM) is the definitive choice for evaluating a fully rented property without expenses, as it provides a quick way to assess value based on gross rental income alone. Other options fail to meet the criteria set by the question, either by involving net income calculations or broader income considerations that do not apply in this context.