Gross Rent Multiplier

**audiokat** · 01-16-2008, 02:15 PM

Is anyone using GRM tools for rental investors. I just started working with an investor who wants to start using GRM to score her investments. I am trying to determine whether any other costs besides list price and yearly gross rents would be involved. As of now my research in text and internet searches indicate no but I wanted the opinions of some industry folks.

Her previous Realtor would pull the yearly taxes and insurance off the top of the gross rents and the divide the sales price by that number. That seems ridiculous for two reasons. 1. Now that's not a gross rent it's a net rent. 2. All properties she sees will have insurance and taxes so it will just over complicate the equation to add something that will be there in all investments.

Thoughts?

**Sparks** · 01-21-2008, 09:32 PM

Take a look at what the CAP rate is. A little easier to understand IMO.

**thedeallocator** · 01-28-2008, 05:37 AM

The CAP rate is good especially for commercial real estate. However, it may come out to be very low for SFR rental property.
You may want to look into the Price/Rent ratio. You want to compare the ratio of your index property to the P/R ratio of other properties in the area. The small the ratio, the better for you. Hope this did not confuse you.