GROSS RENT MULTIPLIER
What is a Gross Rent Multiplier ?
"Gross Rent Multiplier is a capitalization method
for figuring the rough value of a property.
The Gross Rent Multiplier (GRM) formula for value is as follows:
Value = Potential Annual Gross Income X Gross Rent Multiplier
For Example:
$1,200,000 = $150,000 (Potential Annual Gross Income) X 8 (Gross Rent
Multiplier)
Where do I get the Gross Rent Multiplier number to use in the formula?
Usually an appraiser or loan officer will calculate GRM's from comparable closed
sales in the immediate area and then average them to one number. They take
the closed sales prices of the comparables and divide them by the respective Gross
Incomes. The immediate area used for comparables surrounding most subject
properties will fall into a narrow GRM gap. However, GRM's can vary considerably
depending on the location. For an example, Beverly Hills, CA or Manhattan,
NY will have a much higher GRM than a small town in the Midwest.
Need answers on a particular commercial loan you are working on? We encourage you
to run your "Commercial Loan Scenario
Request" by us and we will respond with our best-case scenario from
over 600 Capital Sources. On
the rare occasion that we have not been able to place a commercial loan
package ourselves, we have always been able to help point the customer to the
right source.
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