what is gross rent multiplier mean?

In Buying Property - Asked by chris c. - Jun 22, 2011
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Answer(s)

Varouj M.
Broker/Agent
Fresno, CA

Varouj Mandikian:
RENT MULTIPLIER
AND OR MARKET VALUE
As a real estate investor, you will likely be doing quite a few market value analysis for each property finally purchased. The Gross Rental Multiplier (GRM) is easy to calculate, but isn't a very precise tool for ascertaining value. However, it is an excellent first quick value assessment tool to see if further more detailed analysis is warranted. In other words, if the GRM is way out high or low compared to recent comparable sold properties, it probably indicates a problem with the property or gross over-pricing.
Market Value / Annual Gross Income = Gross Rent Multiplier (GRM)
GRM X Annual Income = Market Value

Jun 22, 2011
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Rob B.
Chandler, AZ

Chris...
This question likely means that you do not yet know enough about commercial real estate. A Gross Rent Multiplier in commercial real estate is so fundamental that one should not pay a lot of attention to it.
The total operation of a property is what must be analyzed. This has to take into specific income sources from the property; specific expense items charged to the operation; deferred maintenance required to meet optimum rental levels; value added costs to achieve improved results, market studies on rents and sales of similar properties in similar market areas; capitalization rates of return and a decent internal rate of return study for the asset being considered.
There are also other refinements in good return on investment possibilities for a particular property.
Keep asking questions, engage in constant study and generally hone your skills in our business. It is a wonderful field for the person who will work to become a professional in his or her conduct and reputation.
Onward and upward Chris... Rob Baird

Jun 22, 2011
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Brent D.
Broker/Agent
Gold Coast, QL

In some markets we define the GRM as the the Property Yield, but more importantly we use the nett income or rental( income after property outgoings or operating costs are subtracted) from the property to give us a more accurate measure of the propertys' worth, using the same calculation
Market Value / Annual Nett Rental = Nett Yield ( True Return ). Brent Devereux DLA Realty industrial AUSTRALIA

Jun 22, 2011
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Toni Nan X.
Broker/Agent
Beverly Hills, CA

GRM is a ratio of the price of the property to its annual rental income BEFORE taxes.
This is a very general ratio, less accurate than cap rate, and it is not usually used.
A more accurate picture would be a profit analysis using actual revenues and expenses (operational, taxes, debt service) to get a NOI, then account for principal reduction, appreciation, depreciation, and personal/corporate taxes.

Jun 24, 2011
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Rick L.
Appraiser
Cleveland, OH

Value = Income X GRM

Sep 8, 2011
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Juan C.
Developer
Orlando, FL

There is an awesome real estate app I use called Realbench that calculates the Gross Rent Multiplier and gives you green or red signals, it also calculates tons of other real estate indicators. You can get it at http://realbench.net, or just go to the Apple Store or Google Play and search for Realbench, in this time and age we don't have to calculate this stuff manually anymore.
http://realbench.net

Apr 8, 2015
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