Illinois Real Estate Practice Exam

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Prepare for the Illinois Real Estate Test. Practice with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

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If a three flat has rents totaling $500 per month and the Gross Rent Multiplier (GRM) is 120, what is the value of the property?

$1,200,000
$400,000
$540,000
$450,000

The correct answer is: $540,000

To determine the value of the property using the Gross Rent Multiplier (GRM), you can use the formula: Value = Gross Rent x GRM In this case, the total monthly rents amount to $500. To find the annual gross rent, you multiply the monthly rent by 12: Annual Gross Rent = $500 x 12 = $6,000 Next, you can apply the GRM to find the property's value. With a GRM of 120: Value = $6,000 x 120 = $720,000 This calculation shows that the property's value is based on the relationship between its total rental income and the GRM, a figure that reflects the market's perception of the value of income-producing properties. By using the GRM correctly and understanding how to convert the monthly rent into an annual amount before applying the multiplier, you arrive at an accurate valuation of the property.