Investor X owns a studio condo that rents for $637.50 per month net after expenses and has a market value of $127,500. Investor Y has a similar condo that rents for a net of $700 per month. Using Investor X's home as a guide, what is the estimated value of Investor Y's condo? (round to nearest $1,000)

Question

Quizplus · Accepted Answer

To estimate the value of Investor Y's condo, we can use the gross rent multiplier (GRM) approach, which is calculated by dividing the property value by the monthly rent. For Investor X's condo, the GRM is 127,500/637.50 = 200. For Investor Y's condo, we can use the same GRM to estimate its value: 700 x 200 = $140,000. Rounded to the nearest $1,000, the estimated value of Investor Y's condo is $140,000, which corresponds to choice C.

Investor X Owns a Studio Condo That Rents for $637