![]() It can be helpful to practice with an example. Gross Rent Multiplier = Rental Property Value / Gross Property Income Otherwise, any comparisons you make will be invalid. When using the gross rent multiplier formula, you’ll want to make sure to keep the factors consistent across all the properties you are considering. You can even choose between monthly or annual income. ![]() How you do this is up to you: you can use the sale price, list price, or property appraisal value. You take the market value of a property and divide it by the property’s gross rental income. The GRM can be quite an effective tool in doing so, as it allows users to easily compare potential investments.Ĭalculating the gross rent multiplier is simple. Commercial real estate often requires investors to be able to make fast-paced decisions about where to delegate their time and resources. The GRM is also particularly beneficial for commercial real estate investors who may be working in highly competitive environments. In calculating the GRM, investors get their first look at the factors they may present to lenders when raising financing. These also happen to be the variables that lenders care about the most when evaluating potential investments (price and potential return). Investors typically have access to both numbers and can easily perform this calculation. There are several formulas in real estate investing, but almost none are as simple as the GRM. The formula utilizes two variables: rental property value and gross property income. The GRM is important to real estate investors because of its speed and utility.
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