California Real Estate Practice Exam

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What would be the value of a similar building where each of four units rents for $750 per month using the gross rent multiplier approach?

$450,000
$375,000
$525,000
$600,000

The correct answer is: $375,000

Based on the information given, we can use the gross rent multiplier approach to determine the value of the building. The gross rent multiplier is calculated by dividing the property's price by the gross annual rental income. In this case, we know that each of the four units rents for $750 per month, so the gross annual rental income would be $36,000 ($750 x 12 months x 4 units). To determine the value of the building, we can use the gross rent multiplier. This multiplier is typically based on market trends and can vary, but for a building with four units, a commonly used multiplier is around 10. Therefore, if we divide the gross annual rental income of $36,000 by the multiplier of 10, we get a value of $375,000. This means that the value of the building would be $375,000 using the gross rent multiplier approach. The other options are incorrect because they do not take into account all of the necessary factors. Option A may have been calculated by simply multiplying the rent per unit by the number of units, but this does not take into consideration the multiplier and would result in a much higher value than the actual amount. Option C and D are also incorrect as they