What is the exam-ready answer?
| Roadmap post | 237 of 500 |
|---|---|
| Official syllabus topic | Valuation and General Calculations: income-based multipliers and rate of return |
| Official PSI area | Real Estate Calculations |
| Published weight | 7% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
| Content checked through | August 2, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual calculation. Follow the stated facts, units, time basis, and rounding instruction.
Formula and variables
| Symbol or term | Meaning |
|---|---|
| Sale price | Price of a comparable income property used to derive the multiplier |
| Gross rent | Rent before operating expenses, using the same monthly or annual period throughout |
| GRM | A market multiplier with no percent sign |
Step-by-step method
- Confirm whether every rent amount is monthly or annual.
- Derive the GRM from a comparable sale by dividing its price by its gross rent.
- Apply that multiplier to the subject property's gross rent for the same period.
- Keep GRM as a multiplier, not a percentage or capitalization rate.
- Use NOI and cap rate instead if the question supplies net income and asks for direct capitalization.
Georgia-specific distinction
Worked examples
Example 1: Monthly GRM
Scenario. A comparable duplex sold for $288,000 and produces $2,400 gross rent each month. The subject produces $2,650 monthly.
- GRM = $288,000 / $2,400 = 120.
- Subject value = $2,650 x 120 = $318,000.
Answer. The GRM estimate is $318,000.
Reasonableness check. The subject earns about 10.4% more monthly rent, so its indicated value is about 10.4% above the comparable price.
Example 2: Annual GRM
Scenario. A small property sold for $420,000 and has $35,000 annual gross rent.
- Annual GRM = $420,000 / $35,000 = 12.
- The answer is a multiplier, not 12%.
Answer. The annual GRM is 12.
Reasonableness check. Using monthly rent of about $2,916.67 would produce a monthly GRM of 144, which is 12 times the annual GRM.
Common exam traps
- Mixing annual price-to-rent data with monthly rent
- Using NOI instead of gross rent
- Writing a percent sign after GRM
- Dividing rent by price and accidentally calculating a gross yield
Original practice questions with detailed explanations
These original instructional questions map to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Write the setup before opening the explanation.
Question 1A comparable sells for $300,000 and rents for $2,500 monthly. What is the monthly GRM?
- A. 8.33
- B. 100
- C. 120
- D. 1,200
Show answer and explanation →
Answer: C. 120
$300,000 / $2,500 = 120. GRM is a multiplier, not a percentage.
Question 2A market monthly GRM is 110 and the subject's monthly gross rent is $2,800. What value is indicated?
- A. $25,455
- B. $280,000
- C. $308,000
- D. $336,000
Show answer and explanation →
Answer: C. $308,000
Value = rent x GRM = $2,800 x 110 = $308,000.
Question 3Which input distinguishes GRM from capitalization rate?
- A. GRM uses gross rent; cap rate uses NOI
- B. GRM uses NOI; cap rate uses gross rent
- C. Both use debt service
- D. Both are always percentages
Show answer and explanation →
Answer: A. GRM uses gross rent; cap rate uses NOI
GRM is a gross-income multiplier. Direct capitalization uses net operating income and a rate.
Mastery tracking
Mark this calculation mastered only when every statement is true.
- I keep monthly and annual rent periods consistent.
- I derive GRM as price divided by gross rent.
- I apply GRM by multiplying the subject's gross rent.
- I never attach a percent sign to GRM.
- I can explain why GRM is less precise than a calculation using NOI.
Recommended next lesson
Continue with Capitalization Rate and Value. Replace gross rent with NOI and a market rate.
Return to the complete calculation hub, formula sheet, or mixed math drill.