1025 GRM Reconcilation section?

[Edward OConor]

In the subjects rent schedule section I would indicate (for actual rents) that one unit is owner occupied and list the rent for the other unit. Then in the estimated rent area I would indicate the estimated rent for both units

If the subject is owner occupied, what is the correct rent to use in the section? Should it be the rental income on the day of inspection or the estimated rent. The estimated rent that assumes that the subject is non-owner occupied?

Same question for vacant units.

It is common and customary for buyers to live in one unit and rent the other(s).

 

[Eli Weiss]

You use the market rent (Gross Rent) on the subject and comps, and then extract the GRM.........

Remember its asking you the gross rent not the actual....

 

[seattle98116]

Like Eli stated...they want market rent. There are 2 camps as I have seen it, but during the discussion, I just point out "What about the vacant unit, when the other 3 are rented...do you only use the 3 rented units?" That seems to get some wheels turning and at least a common ground. A lot of times, when 2-4's are on the market, they are being rented for below market rents...for some reason and that is why the seller is trying to sell. But to compare apples to apples, you should base all rents on market rent, even the ones that are rented, regardless if they are below rent. I usually indicate $1,500A / $1,600M in the space for that and then explain it down below so the reviewer / UW can see what the heck I am up to.
I haven't had any complaints about it...
Justin

 

[Thomas Fiehler]

I must be having a brain f#$^. The GRM is nothing more than the sales price divided my ACTUAL income. No where does it say to guestimate the rent for the comparable. If it is owner occupied then it is not a good rental comparable. I've done hundreds of 2-4 families (possibly thousands) and don't know if I ever had one "rented at market rent". The agent always says the rents are low!

 

[seattle98116]

I must be having a brain f#$^. The GRM is nothing more than the sales price divided my ACTUAL income. No where does it say to guestimate the rent for the comparable.

But what happens when one of the units is vacant...is your GRM then only derived from the units that are rented? If that is your case then wouldn't the GRM be skewed because of the lack of income from the rented unit? My point is that you should base the GRM off of the market rent divided by Sale Price...you may need to use the "market rent" figure that is obtained from the rental comparables, but then you would at least have a GRM that is more in line with the market...not if the seller of a particular property was renting under market. Buyers are looking at "what can it rent for" rather than "what is it currently rented for" and base thier analysis off of that.
Justin

 

[Thomas Fiehler]

If the unit is vacant then you cannot use it to arrive at a GRM. I agree there is some logic if the units are identical but what if they are different size/rooms? The GRM is nothing but a simple calculation but you must have the complete data to do it. It is not unusual on some properties, especially located in areas where one unit is owner occupied, that I do not complete the GRM. As usual, just explain why. You just don't make up the numbers though.

 

[seattle98116]

I think that if you have good rental comps and data then you are not "making up numbers". The premise is though that you need to support your market rent. If you have 2/1's and 3/2's or any mix in between, then if you have market rent data for similar units, then why not apply it to derive a GRM?
That one that you are throwing out may be the "one" that you need to complete the report...
Justin

 

[Mike Boyd]

You use the market rent (Gross Rent) on the subject and comps, and then extract the GRM.........

Remember its asking you the gross rent not the actual....

I agree. For the GRM, I would select the BRACKETED GRM extracted from the sales analysis.

 

[Eli Weiss]

I removed my post, (I don't like to attack anybody).

 

[PropertyEconomics]

The simple fact of the matter is it doesnt matter whether you use ACTUAL rents or MARKET rents ... as long as you are consistent in your measurement and application between your comparable sales and your subject.
If all of the sales are one unit owner occupied and one unit rented .. you would merely use the one actual rent (or you could use one market rent) to determine and develop your GRM.
Similarly when applying that GRM to your subject you would use only one actual rent (or you could use one market rent) to develop a value indication for your subject. You could also use rent from two units (actual or market either one) for measurment of your GRM. Two unit rents will result in a lower GRM but not a lower value. The GRM will change merely based upon how much rent you use to determine the GRM with.
Measurement either with actual or market is acceptable as long as you treat your comparbles the exact same way and disclose which you used in your report.
You should not under any circumstances use actual for say your subject and market for your comparables or vice versa. Mixing will not lead to credible valuation results.