The GRM provides a rough estimate of value. Basically its the number of years the property would take to pay for itself in gross rent recieved.
GRM-(Gross Rent Multiplier) is the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, on-site management, insurance, professional property management, maintenance, decorating, marketing, security, elevator, capital expenses, miscellaneous costs, and mortgage payments.
PURCHASE PRICE/GROSS ANNUAL RENTAL INCOME =GRM; $192,000/$16,000 = 12.
However, the Cap rate is often more important in building valuations.
I hope I was able to answer your question. Please let me know if I can be of additional help.
Jan 27, 2010