The GRM Trap: Why Smart Investors Don’t Rely on This Metric Alone

Описание: Multifamily/apartment investor coaching: https://www.realestatefinanceacademy....
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Gross Rent Multiplier
FORMULA:
GRM = Price / Scheduled Gross Annual Rents

The gross rent multiplier is a pretty simple metric that just says the price divided by the annual gross rents. So in other words, if we had a million dollar property and gross rents were $100,000.00 then we would have a GRM of 10.

One thing to note here is that the GRM only tells us the price relative to the gross income. It doesn't account for expenses and has no relation to the net income. So if expenses go up or down, the GRM won't change. It only changes with the rising or falling of the gross income. Gross rent multiplier is not typically used very often, certainly not in valuation, but it is just another metric that allows investors to compare one property's price to it's gross income versus another.

A more accurate metric to use when evaluating properties would be cap rate, or in the case of a leveraged acquisition, the cash on cash return.

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