Massachusetts Real Estate License Practice Test 2025 – Complete Exam Prep

The Gross Rent Multiplier (GRM) is a method used to evaluate the rental value of a property. It provides a quick way to assess the potential income-generating ability of an investment property by comparing its price to the gross rental income it produces. The GRM is calculated by dividing the property's purchase price by its annual gross rental income. A lower GRM indicates that the property may be more attractive to investors, as it suggests a higher rental income relative to the cost of acquiring the property. This metric allows investors to make quick comparisons between various rental properties, helping them to assess their potential for generating income.

The other options mentioned, while relevant to real estate finance, serve different purposes. A rental yield calculator is used to determine the percentage return on an investment property based on its rental income relative to its purchase price or market value. Net Operating Income (NOI) is a measure of a property's profitability, calculated by subtracting operating expenses from rental income, but it doesn’t directly assess rental value. The Appraisal Value Index is typically used to track changes in property values over time rather than specifically addressing rental income.