Last time in our series on beach house economics, we looked at capitilazition rate. Today we will take a look at Gross Rent Multiplier or GRM. GRM is another way to compare similar income producing properties. GRM like Cap rate is a simple way to start property comparisons. To compare properties by GMR, you need two pieces of information: sales price and gross monthly rent.
Calculating the GRM:
To calculate the GRM, you need to take the sales price and divide it by the gross monthly rent.
Sales Price: $100,000
Gross Monthly Rent: $1,250
Gross Rent Multiplier or GRM: 80
While it does have many limitations, including not taking into account vacancy and differences in operating expenses, GRM is a way investors can quickly eliminate prospective properties. By no means is using GRM the only factor in choosing a home, but you can definitely use GRM to narrow down your field.