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The Gross Rent Multiplier (GRM) is a valuation metric that compares a property's price to its gross rental income. It provides a rough measure of the value of an investment property. A high GRM indicates that a property may take longer to become profitable, as it suggests a higher purchase price relative to the rental income it can generate. Conversely, a lower GRM suggests a property may become profitable more quickly, as it indicates a lower purchase price relative to potential rental income. Therefore, investors often seek properties with lower GRMs as they can potentially offer a quicker return on investment.
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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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