What is Grm in Real Estate?
GRM, or Gross Rent Multiplier, is a metric used in the real estate market to compare the value of properties based on their rental income. It allows investors and real estate agents to quickly assess a property’s potential profitability and establish a fair price for a real estate transaction.
How is GRM Calculated?
GRM is calculated by dividing a property’s sale price by its gross annual rental income. For example, a property with a sale price of $475,000 and an annual rental income of $37,500 (or $3,125 per month) would have a GRM of 475,000/37,500, which equals 12.67.
What Does a High/Low GRM Mean?
A high GRM (greater than the market average) indicates that a property is overpriced, while a low GRM (less than the market average) indicates that a property is underpriced. The higher the GRM, the less profitable a property is expected to be.
What Are the Advantages of Using GRM?
GRM has several advantages over other metrics used to assess real estate investments:
- Simple and Fast: GRM is a simple calculation that can be done quickly and with just a few pieces of information.
- Objective: GRM is an objective metric and is based solely on the property’s sale price and rental income.
- Comparative: GRM is a great tool for comparing properties on the market, as it can quickly and easily provide a “price per unit of income” for any given property.
GRM is an invaluable tool for investors and real estate agents when evaluating potential real estate investments, as it provides a quick and easy metric to compare the potential profitability of different properties.