How To Calculate and Use the Gross Rent Multiplier (GRM)
By James Kimmons. Real Estate Business Expert
Jim Kimmons has many years of experience as a real estate agent and broker in three states, and serves as a consultant to other real estate professionals on using technology to improve their marketing and office management.
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Real estate investors who are actively seeking properties often have several, or even dozens on their radar. They need to find a way to quickly rank the opportunities so that they can spend their time in deeper analysis on the best opportunities first. Using the Gross Rent Multiplier allows them to get into deeper research on the best properties under consideration. maybe.
Time Required: 5 Minutes
- Getting the GRM for recent sold properties:
Market Value / Annual Gross Income = Gross Rent Multiplier (GRM)
Property sold for $750,000 / $110,000 Annual Income = GRM of 6.82
Let's say that you did an analysis of recent comparable sold properties and found that, like the one above, their GRM's averaged around 6.75. Now you want to approximate the value of the property being considered for purchase. You know that its
gross rental income is $68,000 annually.
If it's listed for sale at $695,000, you might not want to waste more time in looking at it for purchase.
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