The GRM or “gross rent multiplier” used to be a common tool of many real estate investors. There are better ways to put a value on a property now. You may be familiar with the gross rent multiplier. This simple formula for determining the value of rental real estate has been around for ages. The first book I read on investing in real estate advised me to \”never buy a property with a GRM of more than 8.\” GRM is the acronym for gross rent multiplier, of course, and the formula is this: divide the price by the gross annual rents to get the GRM. In other words, the author was advising me to never pay more than 8 times the annual rent for a rental property. That seemed simple enough. I started looking at properties in terms of GRMs. If it was selling for 6 times rent it must be a good deal. If it was 12 times rent it had to be bad. It was great to have such a simple rule to follow – except that it never was a good rule to begin with. Using a gross rent multiplier is a crude way to put a… Read full this story
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