Which rule of thumb version is being offered to an investor who is told that a house renting for $900 a month should sell for about $90,000?

The concept being referenced is the Gross Rent Multiplier (GRM), which is a rule of thumb used by real estate investors to evaluate the potential value of rental properties. The GRM is calculated by dividing the property's market value by its gross rental income.

In this scenario, a house renting for $900 a month and selling for approximately $90,000 suggests that investors are using the GRM to establish a quick estimate of the property’s value based on its rental income. Here, the GRM would be derived from the formula:

GRM = Property Price / Monthly Rent

Using the provided figures:

GRM = $90,000 / $900 = 100

This means that the GRM in this situation is 100. Using the GRM helps investors quickly assess whether a property is priced appropriately relative to its rental income, enabling them to make quicker investment decisions.

Other options, such as Cap Rate, CMA, and Cash Flow, serve different purposes in real estate analysis. The Cap Rate focuses on the return on investment based on net income rather than gross rent. A CMA (Comparative Market Analysis) is more about analyzing similar properties in the area to establish market value. Cash Flow refers to the actual revenue remaining