A Gross Rent Multiplier (GRM) is a simple ratio that compares a property's market value to its annual gross rental income. It's a quick way for investors to evaluate the potential profitability of a rental property.
How to Calculate GRM:
The formula for calculating GRM is:
For example, if a property is worth $500,000 and generates $50,000 in annual rent, the GRM would be:
GRM = $500,000 / $50,000 = 10
What does calculating GRM mean?
A lower GRM generally indicates a more profitable investment. However, it's important to note that GRM doesn't account for operating expenses like property taxes, insurance, maintenance, and vacancy rates. GRM is particularly helpful for an initial comparison but should be used in conjunction with other financial metrics for a comprehensive analysis.
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GRM is such a handy tool for a quick property valuation.
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The gross rental multiple is a screening metric that investors use to compare rental property opportunities in a given market.
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