What aspect of income is the GRM based on?

Prepare for the National Appraiser Exam with targeted flashcards and multiple choice questions, complete with hints and explanations. Ace your test confidently!

The Gross Rent Multiplier (GRM) is calculated using the relationship between the property’s value and its rental income. Specifically, the GRM is derived from the annual rental income of a property, which is then typically converted into a monthly figure for a practical application. This means that while the base calculation might derive from annual income, the more common usage and application of GRM involves using the monthly rental income.

The reason monthly income is the focal point in GRM usage is that real estate investors often prefer to analyze properties based on monthly cash flows. This monthly perspective allows for a more straightforward comparison between properties and aligns more closely with multifamily property investments, where rent is usually collected on a monthly basis. Therefore, the correct choice reflects the foundational aspect of GRM as it is applied in investment scenarios.

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