You’ve probably heard the term GRM, or gross rent multiplier. Perhaps you have been in a conversation where people were talking over your head and you didn’t really understand what it meant. I’m no guru, but I’m going to share exactly how I use GRM so you can hopefully move forward with this information.

Hey there, it’s Billy with KeePon Cashflow, and I’m back once again! I’m going to share some tips and tactics on how you can make more money, have more control over your free time, and ultimately live with less stress. Right up front, I’m going to ask you that, if you find value in this blog, please like it and leave a comment. I always want to know what it was that added value for you! Please also share it if you can, as that will help others like you and will add value to their life. That just makes a much better world for everybody!
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So, let’s talk about what GRM is and how you can use it. Like I said, I’m no guru, but when you start looking at things like GRM, you can figure out what it is and how you can use it for practical applications. On that note, the gross rent multiplier is an estimate of the market value of an income-producing property. If you buy streams of income, which is typically what we do as real estate investors, and especially multifamily real estate investors, it’s more or less in line with other types of properties in a specific location. When I say location, a lot of people say market, but I’m talk about the fact that it’s very location-specific. The GRM is related to whether you’re paying more or less for a similar stream of income from an income-producing property or rental real estate.

So, basically, GRM is an easy way to understand whether or not you should invest more time in a property. Right up front, one big advantage of GRM is the fact that you don’t need a sophisticated calculator or massive internal rate of return.

On the other hand, one of the disadvantages of GRM is the fact that it doesn’t take into consideration some aspects that are important, especially to an investor.

For example, it doesn’t take into consideration the time value of money. A dollar today is worth more than a dollar in the future. That’s one of the concepts that GRM doesn’t take into account. It also doesn’t take into account the expenses paid by a tenant. GRM only looks at your gross scheduled income. I’ve done videos on this in the past, and it really looks at what your P&L is, which is one of the top lines of your income statement. If you compare a specific location or specific property, such as five different properties in the GRM, which is basically the selling price or market value divided by the gross schedule income on an annual basis, it gives you the GRM number.

If you have those five properties, imagine one of them has a GRM of 5 and another has a GRM of 6, and then 5.5, 7, and 12. Well, 12 would be outside the norm, so you would want to understand why it is so high when everything else is more or less between 5 and 7. In this case, GRM, is a quick way to understand whether or not you want to invest more time in a specific property.

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Hopefully this has been informative and helpful to you! Please leave a comment and let me know what you liked, what you didn’t like, and if you’re using GRM. For those of you who are here for the first time, I work in Europe and invest in multifamily assets back in the United States. I have a clear process on how I’ve been doing that, and you can find out in a free eBook just by clicking here. If you’ve found value in this video, go ahead and make sure you like it. Leave your comments and share it with other people. This is Billy at KeePon Cashflow, and that’s my two cents for today. As always, hasta la próxima.

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