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The Gross Rent Multiplier (GRM) is a real estate valuation metric that compares a property's price to its gross rental income. It's calculated by dividing the property's price by its gross annual rental income. GRM provides a rough measure of the value of an investment property. It's a useful tool for comparing and analyzing the value of similar properties in a specific market area. A lower GRM generally indicates a more favorable investment opportunity, as it suggests a shorter time for the investment to earn a profit.
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The spreadsheet calculates total expenses and revenues based on the inputs. It shows the Net Operating Income (NOI), the Gross Rent Multiplier (GRM), and the capitalization rate, which is all information that buyers need to make informed comparisons between property values. The GRM is one of the best ways to see a property's value in relation to similar properties in an area. A high GRM implies that a property will take longer to turn a profit. Investors look for a lower GRM because it indicates that there is a shorter time for the investment to earn a profit.
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Need to compare real estate investment opportunities? Use the Residential ProForma spreadsheet to quickly identify if a real estate investment opportu...
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