Hi there,
When I decided to invest in a new property, I knew I would face many challenges. One of the most crucial challenges that I had to face was determining and comparing the investment in neighbourhood or similar property portfolios. It is crucial because it gives you a better idea of the returns which you will get in future through your investment in a property. But I did not know how to do it. It was another investor friend of mine who told me about Gross Rent Multiplier. I did not know about the GRM meaning. So, he patiently explained it to me and also helped me calculate the GRM of the related properties and the property which I was interested in.
Get rent estimates through ‘know your rent’ services of NoBroker through the thousands of properties listed on the platform.GRM meaning real estate
Investors use the gross rent multiplier (GRM) to compare rental property opportunities in a given market. The GRM is calculated as the market value of a property divided by its annual gross rental revenue.
To put it another way, let's assume one property earns Rs. 20,000 in rent while another earns Rs. 12,000 in rent.
You need to figure out how much rent you'll get in relation to the cost of the property. If both properties cost Rs. 20,000, the one that leases for Rs. 20,000 will provide the best return on investment. This, however, varies as property costs fluctuate. To make that determination, you can use GRM.
How To Calculate GRM Using A Simple Formula
Fair Market Value/Gross Rental Income = Gross Rent Multiplier
Example: Fair Market Value: Rs. 20,00,000 / Rs. 2,40,000 8.3 GRM Gross Rental Income
The GRM methodology compares the fair market value of a property with its gross rental income. The payout duration, as shown in the mathematical example, is just over 8 years. Other costs, such as unit repairs, vacancy between renters, property taxes, and insurance, are not included in this computation.
What Is A Good Gross Rent Multiplier?
The sort of rental market in which your property is located has a significant impact on the GRM. However, you should aim for a GRM of four to seven. With a reduced GRM, you'll be able to pay off your rental property in less time.
However, it is dependent on the market in which you are purchasing. In some markets, a GRM of 7.5 for a specific investment property may not appear to be "too high."
Read More: What is Gross Annual Value?
What is GRM Meaning?
Amir Sheikh
547 Views
1
2 Year
2022-06-13T10:15:18+00:00 2022-06-16T14:16:00+00:00Comment
Share