GRM

[OG80]

Working on my first 1007. INCOME APPROACH TO VALUE: Figured out the Est Monthly Market Rent but now, how do I figure out the Gross Rent Multiplier? Where would I get the information to determine what that should be?

 

[Michigan CG]

Do you know the rents for your sale comparable properties? Have you taken the income class?

 

[glenn walker]

Here's the formula to calculate a gross rent multiplier:

1. Gross Rent Multiplier = Property Price / Gross Annual Rental Income.
2. Example: $500,000 Property Price / $42,000 Gross Annual Rents = 11.9 GRM X 12=A GRM=142.8 and the 12 month GRM is what you use on a Fannie Form.

There also some online GRM Calculators for free and you may want to play with those -One is www.omnicalculator.com/finance/gross-rent-multiplier

 

[Dublin ohio]

Best way is to use rented sales. Sometimes not easy to find. Otherwise. Use market rents and market sales and apply the formula provided by Glenn

 

[OG80]

Do you know the rents for your sale comparable properties? Have you taken the income class?

Yes, I know the rents for rentals in the area, but they are not the same as my comparables (Active, Sold). Yes, I have taken the income class.

 

[Dublin ohio]

but they are not the same as my comparables

The sales used to develop the grm do not have to be the same as you "comparable" sales and very seldom are. Unless you are in a market with a high number of noo properties.

 

[OG80]

Best way is to use rented sales. Sometimes not easy to find. Otherwise. Use market rents and market sales and apply the formula provided by Glenn

So, if I'm reading this correctly, I take the Indicated Value of my Subject which is $199,350 / $18,576 (1007 Result on Subject) = 10,7 GRM X 12 = 128.77 and that's what I put in the GRM.

 

[Mark K]

I've always considered Rent as monthly and Income as annual.

You can skip a step by just using the Gross monthly rent. $100,000 (value)/$1,000 (monthly rent) = 100 GRM.

 

[Dublin ohio]

So, if I'm reading this correctly, I take the Indicated Value of my Subject which is $199,350 / $18,576 (1007 Result on Subject) = 10,7 GRM X 12 = 128.77 and that's what I put in the GRM.

Your market grm is the one that should be applied to the subject. For instance. Rented market sale 100k. Rent at time of sale 900 mo=grm of 111. Same would apply if using non rented market sale and market rents. This would need to be done with various sales/rents to come up with an idea of where grm would actually be. So if market grm is say 115. You would take 115 x subject's 1548 mo rent=$178,000 indicated value by income approach

 

[Carnivore]

Pros & Cons of Using Gross Rent Multiplier to Evaluate Investment Properties

Gross Rent Multiplier (GRM) is the ratio of the price of a real estate investment to its annual gross potential income. GRM can be thought of as the number of years it would take for a prope…

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