What does GRM stand for in real estate valuation?

The correct answer is Gross Rent Multiplier. The Gross Rent Multiplier is a valuation metric used in real estate to assess the value of rental properties. It is determined by taking the property’s sale price and dividing it by its gross annual rental income. This multiplier helps investors estimate the potential income that a property can generate in relation to its price, which aids in making informed investment decisions.

Using Gross Rent Multiplier is particularly useful because it simplifies the valuation process for income-producing properties. Investors can use this ratio to compare similar properties, evaluate potential investments, and gauge whether a property is overvalued or undervalued based on its rental income.

Other terms such as Gross Revenue Multiplier and General Rent Multiplier may sound similar but are not standard terminology in the context of real estate valuation. The distinction is important as it directly impacts how investors and appraisers analyze properties and interpret income streams.