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Calculating GRM for single family residential. None of the rentals have sold in the last year.

Samiam

Thread Starter
Freshman Member
Joined
Sep 14, 2016
Professional Status
Certified Residential Appraiser
State
Oklahoma
I am appraising a single-family investment property. None of the rental comps have sold in the last year. How do I calculate a reliable GRM?
 

George Hatch

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Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
You can do rental surveys for each of your sales to see what their market rents would be, thus *implying* their respective GRMs. Or, you can find less directly comparable sales that did sell with rents and select from that range. If such data is available.

Sometimes your rental listings will have a recent sale in their sales history, too.
 

Dublin ohio

Senior Member
Joined
Mar 20, 2008
Professional Status
Licensed Appraiser
State
Ohio
Use any SFR rental that has sold. Does not have to be a comparable rental
 

Samiam

Thread Starter
Freshman Member
Joined
Sep 14, 2016
Professional Status
Certified Residential Appraiser
State
Oklahoma
I went outside the neighborhood and pulled 27 rentals. Three of them sold within the last year. Thank you for the feedback.
 

Renee Healion

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Gold Supporting Member
Joined
Feb 21, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
The GRM is a rate, an expression of the relationship between sale price and income. Has that changed over time or distance? It may be fairly stable.

eta: just spotted the OP's last post--you got it!
 

George Hatch

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Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
"So let it be written. So let it be done."
 

Terrel L. Shields

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May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
A few years ago I was informed that the GRM is always 100. :unsure:
An accountant I knew used 91. His sinking fund analysis of interest and income suggested that was the appropriate number of months necessary to recoup the investment. He also used that to vet a purchase of a rental. If you paid $91k then you should get $1000 a month rent. If it wouldn't rent for that, it wasn't worth the 91k.

When I couldn't find sales that rented, I tried to find rentals and compared to similar homes that sold as a proxy. In small towns that seems to be reasonable. I am working on a duplex...All my sales are identical halves. My subject had a larger 3 bed duplex with a 2 bed duplex, and the larger unit is larger than any comps. Will the income help? Nope. The occupant has been there since 2001 and her rents are below market substantially. Whattodowhattodo....
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
If there aren't sale properties which strongly compare with rental properties, it is a strong indication that a rent multiplier isn't a very reliable approach to value. I say that a lot.
 

BRCJR

Senior Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Unless the SUR is in a predominantly rental market the most probable buyer may not be an investor. It may be an owner occupant. The GRM has little to no weight in those cases.
 
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