Gross rent multiplier
People also ask
Why is the GRM important to real estate investors?
The GRM is important to real estate investors because of its usability and speed. The formula itself utilizes only two variables: rental property value and gross property income. There are several formulas in real estate investing, but almost none are as simple as the GRM.
How can GRM be used to estimate the value of property?
GRM can also be used to estimate the property value of an investment you are considering. If you ran the gross rent multiplier formula for a few properties and found an average, you could use that number alongside the annual rental income. Together, these variables would allow you to reverse calculate the property value.
What does it mean when the GRM of a property is high?
It probably indicates a problem with the property or gross over-pricing if the GRM is too high or low compared with recently sold comparable real estate. Investors who are actively seeking properties often have several on their radar.
How do you find the GRM of recently sold real estate?
You can get the GRM for recently sold real estate with this equation: Market Value / Annual Gross Income = Gross Rent Multiplier If a property sold for $750,000 with $110,000 annual income, the GRM is 6.82. Use GRM to Estimate Property Value