A number representing the relationship
between the rent that can be obtained from a
property and its selling price. 2-Income
multipliers are currently used in the
marketplace: the monthly rental
factor (MRF) and
the gross rent multiplier (GRM).
These income multipliers could be used in
either residential or income properties,
when the rent from the property is known.
The MRF and GRM are generally grouped
under the income approach to value. Care
must be taken that the properties have
similar characteristics before multipliers
can be used, the comparable properties must
be similar in size and location.
MRF is the ratio of
value to gross monthly rent. If the value is
$60,000 and the monthly rent is $600, then:
MRF = 60,000
÷ 600 = 100
The calculation demonstrates that the
property is sold for 100 times its monthly
rent.
GRM represents the
ratio of value to gross annual rent to
estimate the value of income producing
properties. The buildings must be comparable
for the GRM to be true.
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