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Gross Rent Multipliers

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pkbarnhart

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For those of you who do appraisals on 2-4 family units I have a reasonably generic question. What are the ranges of GRM's that you find in your market area?

The market I live in has had very few 2-4 unit sales in the past several years and I have recently been asked to appraise three different duplex properties. The properties are all less than 5 years old, have about 1100 sf of living space, 2 bedrooms, 2 baths and either a one or two car garage. Previous sales have GRMS ranging from 83 to about 90. The last sale of a similar property was for $125,000 with Gross Rents of $1500. I am just isolated enough that I have no idea what ranges of GRMs there are in the rest of the country. Any feedback would be greatly appreciated.
 

Russ

Sophomore Member
Joined
Feb 25, 2002
It does not matter, irrelevant! What goes on in your market is the issue! Just for the record, here in Denver the GRM is usually above 125. The Denver market is red hot and the rental market is synonymous!
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Ditto! You must get GRM from your local area. Are there no single family rental house sales? Listings? Anything to help provide support data? If there truely is no data to be had, there may be a good reason. :wink:

Where I am, it runs from 90 to well over 100 for the good rental units. Very tight rental market. Very, very low vacancy rate, most good units have a waiting list.
 

Tim Hicks (Texas)

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Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
You get your GRM's from the very comps in your report. Any other area just is not relevant to your market area.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Gross Rent Multipliers are a very simplistic measure of an income property's value and do not always illustrate the market's reaction towards a property.

Traditionally, real estate investors also consider future management, vacany, and maintenance costs but these days in Southern California, small income property values seem to be based primarily on speculation.

In my area, the price of small duplexes has almost doubled in the last couple of years and it's hard to find an investment where you can "break-even" on the monthly cash flow with a down payment of less than $150,000 - $200,000 (and that's on a $375,000-$450,000 duplex!).

The last report I did had a range of GRM's from 153 to 219. It's pretty clear that the local market doesn't pay much attention to GRM's, so I don't either. If I worked in an area where buying and selling decisions were based on GRM's, I'd change my tune and rely heavily on that approach to value.
 

lafferty

Sophomore Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
If you don't have enough "good" data for a GRM, why not develop a cap rate and do the Income Approach that way? I have done that in the past.
Good luck,
Dave
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
In my market they tend to be all over the board, with very high multipliers for converted homes in declining neighborhoods and very low multipliers for a new duplex in a new subdivision. Seems that the investors recognize the risks and want higher rewards in terms of higher cash flows for those properties which will have higher vacancy and loss rates as wells as a greater likelyhood of larger or more frequent repair expenditures.
 
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Anonymous

Thread Starter
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It seems to me that GRM's in a tight range from 83 to 90 is a good indicator of activity in your market. You might want to test older sales, assuming market conditions haven't changed too much, but I think that you already have your answer.
 
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