Gross Rent MultiplierPosted by Red Sky Realty Group on Tuesday, March 24th, 2009 at 8:36pm.
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.
By: Kevin OBrien
Kevin OBrien is President and Social Media Director at Red Sky Realty Group. You can find him and Red Sky Realty Group on Google +, Twitter, Pinterest, Instagram, and Facebook.
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