For which type of property would you calculate the gross rent multiplier?

The gross rent multiplier (GRM) is a metric used primarily in real estate to evaluate the potential profitability of rental properties. It is calculated by dividing the property’s sale price by its gross annual rental income. This method is particularly relevant for properties that generate rental income, making it useful for investors to assess their investment against others.

In this context, a duplex used as a rental property is an ideal candidate for calculating the GRM because it is designed specifically to generate rental income from tenants. The income produced by each unit adds up to provide a holistic view of the property’s potential profitability, allowing investors to make informed decisions about purchasing or valuing the duplex.

Other types of properties, like single-family homes and commercial office buildings, are also viable for GRM calculations, but they may be less common in certain investment evaluations compared to multi-unit residential properties like duplexes. Vacant land, on the other hand, does not produce any rental income and therefore is not applicable for GRM calculations, as there is no income to generate a multiplier. The focus on rental income generation makes the duplex the most appropriate choice for evaluating using the gross rent multiplier.