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GRM: Adjusted vs Unadjusted

Discussion in 'General Appraisal Discussion' started by ZZGAMAZZ, Oct 17, 2010.

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  1. ZZGAMAZZ

    ZZGAMAZZ Senior Member

    0
    Jul 23, 2007
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Would the GRM for a multiple-unit residential income property be more meaningful if calculated on the adusted value rather than the selling price?
     
  2. CANative

    CANative Elite Member

    534
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    No. Because the GRM is simply the sale price divided by monthly rent. It is what it is when purchased.

    However, you need to reconcile to the GRM you would use for the subject.
     
  3. Denis DeSaix

    Denis DeSaix Elite Member

    534
    May 16, 2005
    Professional Status:
    Certified General Appraiser
    State:
    California
    Without also adjusting the rents, I think that would lead to meaningless results. And, if one is adjusting the rents as well, one is just duplicating the SCA in the income analysis.

    The GRM is based on gross rents. If similar properties are analyzed, in general, the GRMs should reflect a market valuation multiplier used by investors in that market.

    If I have two buildings, and their risk profiles (maintenance costs, location, renter market, etc.) are similar, then their GRMs should be similar. Note that the similarity is not necessarily dependent on unit size or even unit mix. My 3,000sf building should have a similar multiplier as my 4,500 building if the two buildings are investor-purchased properties.

    Presumably, the 4,500sf property has higher gross rents than the 3,000sf building. Assume that your subject is somewhere in the middle; if you calculate the GRM of the larger property using its higher rents and the lower adjusted sale price, you are going to have a lower-than-market multiplier. Likewise, if you do the same to the smaller property, you are going to have a higher-than-market multiplier (assuming building size is a component of value).
     
  4. Michigan CG

    Michigan CG Moderator Staff Member Moderator

    570
    Nov 1, 2006
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    Sort of.....how's that?

    The GRM must be based on the total acquisition cost of the property for it to be habitable. If the property cannot be rented because of broken pipes and missing floors then the total cost to make it rentable to figure a GRM.

    If you are talking about mixing the SCA and Income approaches then no, do not figure GRM after adjustments; the market rents of the comps should already reflect the property differences.
     
  5. Y-TOWN

    Y-TOWN Junior Member

    0
    Mar 10, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Ohio
    GRM - adjustable?




    Educationally and in the real world GRM’s are not adjustable - there are what the are.
     
  6. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    191
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    GRMs work best when you're dealing with similar properties with similar . If the properties are dissimilar, the use of other multipliers/rates may be in order.
     
  7. Pittsburgh Pete

    Pittsburgh Pete Elite Member

    112
    May 6, 2008
    Professional Status:
    Certified General Appraiser
    State:
    Pennsylvania
    Never adjusted--might look at GRM's in context of expense ratios. Typically, the lower the expense ratio, the higher the GRM and vice versa. Good luck.
     
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