Freehold

Cap Rate & GRM formula

Gross Rent Multiplier Formula

GRM = property price ÷ annual gross rent

Gross Rent Multiplier

GRM = property price ÷ annual gross rent
  • property price — Purchase price or value
  • annual gross rent — Total rent collected in one year before expenses

Worked example: Price is $360,000, annual gross rent is $30,000.

  1. $360,000 ÷ $30,000 = 12

GRM of 12

Other Cap Rate & GRM formulas

Gross Rent Multiplier practice questions

Every Freehold question shows why the right answer is right — and cites its source.

A seller collected $1,860 in rent for July in advance. Closing takes place on July 21, with the seller responsible through the closing date. Using a 30-day month, how much rent must the seller credit the buyer for the 10 remaining days (July 22–31)?

  1. $1,240
  2. $620
  3. $62
  4. $1,860
Show answer & explanation

$620 — Daily rent is $1,860 ÷ 30 = $62. The buyer is owed a credit for the 10 remaining days: $62 × 10 = $620.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A rental property generates $42,000 in net operating income and is valued at $600,000. What is the cap rate?

  1. 6%
  2. 8.4%
  3. 7%
  4. 14%
Show answer & explanation

7% — Cap rate is NOI divided by value: $42,000 ÷ $600,000 = 7%.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A duplex priced at $348,000 generates $29,000 in annual gross rent. What is the gross rent multiplier?

  1. 1.0
  2. 8.3
  3. 6.0
  4. 12.0
Show answer & explanation

12.0 — GRM compares price to annual gross rent: $348,000 ÷ $29,000 = 12.0 times annual rent.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

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