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Definitions
Internal Rate
of Return
Modified Internal Rate of
Return (MIRR)
Net Operating Income (NOI)
Loan to Value Ratio
(LTV)
Cash on Cash Return
Capitalization Rate
Gross Rent Multiplier
(GRM)
Debt Coverage Ratio
(DCR)
Real Estate Terms |
Gross Rent Multiplier (GRM)
The Gross Rent Multiplier (GRM) is another way to
value and compare properties. Used mostly in the apartment industry, the
GRM is much like the Capitalization Rate
except the gross rental income rather than the net operating income (NOI) is
used to determine the value of a property. The GRM is calculated by
dividing the fair market value of the property by the monthly gross rental
income.
The Gross Rent Multiplier is also used to determine
the number of years the property would take to pay for itself in gross
received rent. The lower the GRM is then the better the investment is
assumed to be.
EXAMPLE:
If the sales price for a property is $200,000 and the annual gross rental
income for a property is $30,000, the GRM is equal to 6.67 ($200,000 ÷
$30,000).
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