In GRM analysis, which factor directly drives the estimated value?

In GRM analysis, which factor directly drives the estimated value?

• A. Gross monthly rent.
• B. Net operating income.
• C. Vacancy percentage.
• D. Replacement cost of improvements.

Answer: (A)

GRM valuation hinges on the rent a property can generate. In this approach, the estimated value is found by multiplying a gross rent figure by a market gross rent multiplier. The rent used is typically gross monthly rent (or annual gross rent), which directly scales the value output. Net operating income relates to a different valuation method that uses capitalization; vacancy percentage can affect the rent figure but isn’t the direct driver in the GRM method. Replacement cost of improvements belongs to the cost approach and does not drive GRM value. So the factor that directly drives the value in GRM analysis is the gross monthly rent.

GRM valuation hinges on the rent a property can generate. In this approach, the estimated value is found by multiplying a gross rent figure by a market gross rent multiplier. The rent used is typically gross monthly rent (or annual gross rent), which directly scales the value output. Net operating income relates to a different valuation method that uses capitalization; vacancy percentage can affect the rent figure but isn’t the direct driver in the GRM method. Replacement cost of improvements belongs to the cost approach and does not drive GRM value. So the factor that directly drives the value in GRM analysis is the gross monthly rent.