How is value estimated using the Gross Rent Multiplier?

The correct response emphasizes the relationship between the Gross Rent Multiplier (GRM), economic rent, and the value of a property. The Gross Rent Multiplier is a valuation tool used primarily in income-producing properties to help estimate the value based on the rental income it generates.

When you multiply the GRM by the economic rent, you obtain an estimate of the property’s value. This method relies on the premise that rental income is a key factor driving the value of income-producing real estate. Economic rent refers to the income a property can generate under normal market conditions, making it a crucial component in this calculation. Therefore, the equation effectively converts the potential income of the property into an estimated market value, offering a straightforward approach to derive the value from a rental perspective.

The context shows that other formulations provided in the question may reflect various aspects of how GRM is utilized but do not align directly with the fundamental approach of estimating value through the multiplier and economic rent.