Home Buying in 19301>Question Details

Rf, Home Buyer in 19301

what is the GRM for 19301?

Asked by Rf, 19301 Sun May 15, 2011

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I would suggest you get reliable figures for Paoli rental properties and consider the following when 'crunching the numbers'.
The GRM formula uses the monthly potential rental income and doesn't account for a vacancy factor which could have an impact on the accuracy of the property value estimates. Many investors understand the above limitations and uses the gross rent multiplier to get a quick feel for the potential market value of an income property.
The GRM is sometimes calculated using the effective gross income rather then the potential rental income thus incorporating the vacancy factor in the GRM calculation. Effective Gross income equals potential rental income minus the vacancy amount. When vacancy rates are a factor, using the effective gross income will produce a more reliable estimate.

The capitalization rate is a more reliable tool for estimating the value of income producing properties since vacancy amount and operating expenses are included in the cap rate calculation. The GRM is useful in providing a rough estimate of value.

0 votes Thank Flag Link Sun May 15, 2011
The Gross Rent Multiplier or GRM is a ratio that is used to estimate the value of income producing properties. The GRM provides a rough estimate of value. Only two pieces of financial information are required to calculate the Gross Rent Multiplier for a property, the sales price and the total gross rents possible. If this information is available for multiple recent sales of similar types of income properties in a particular area, it can then be used to estimate the market value of other similar properties in that area. Some investors use a monthly Gross Rent Multiplier and some use a Yearly GRM. The monthly Gross Rent Multiplier is equal to the Sales Price of a property divided by the potential monthly rental income and the Yearly GRM is the Sales Price divided by the yearly potential rental income. Good hunting!
0 votes Thank Flag Link Sun May 15, 2011
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