What is the definition of "gross rent multiplier"?

For multi-family dwellings and busineses
In Buying Property - Asked by Steve B. - Feb 28, 2017
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Answer(s)

Tina T.
Appraiser
Maryville, TN

GRM is calculated by dividing the sales price of a property by the income. This can be represented as a monthly or annual multiplier. It is most commonly used by small income property investors such as 2-4 family or small apartment complexes. The downfall is that the gross income can sometimes be skewed if the rent includes items such as water, electric, etc. If using this technique, it is important to always ensure consist income is used excluding any unusual expenses.

Feb 28, 2017
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Juanita A.
Broker/Agent
Hollywood, FL

The GRM compares how much is paid for the property with how much income it produces. It is not an accurate measure of return and should not be relied upon for valuation. It is just a "rule of thumb".

Mar 2, 2017
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Alex A. G.
Broker/Agent
Miami Beach, FL

The GRM is the sales price divided by the gross potential income (before the vacancy factor). Best use is as an indicator of how many times the asking price is covered by the gross rents as a comparative tool against other similar properties. Many factors can skew the comparison, such as: size, rental market, expense ratios, etc. That's why it's not considered a very reliable indicator of value.

Mar 2, 2017
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