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Question 21.) Which of the following is correct? I. The gross rent multiplier (GRM) tells how...

Question 21.)

Which of the following is correct? I. The gross rent multiplier (GRM) tells how many years it would take to recover the total investment costs (purchase price) if all the gross income were allocated toward capital recovery. II. When analyzing a potential investment in an already established property, a high GRM based upon the asking price of the investment possibly indicates that the price is too high.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

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Answer #1

Option C - both (I) and (II) are correct.

GRM tells you how many months it will take for the property to pay for itself, using the gross income. Also, a high GRM compared to recent comparable sold properties indicates gross overvaluation or some problem with the property.

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