medium · National Real Estate Exam
An appraiser chooses to use the Gross Rent Multiplier (GRM) rather than the capitalization rate (Cap Rate) for a single-family rental.
What is the primary reason for this choice?
- GRM is more commonly used for 1-4 unit residential properties where detailed expense data is less available.
- GRM is required by federal law for all residential appraisals.
- GRM accounts for operating expenses and vacancy more accurately than the Cap Rate.
- The Cap Rate is only applicable to properties with multiple units, such as apartment complexes.
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