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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 11Calculation 5: Gross Rent Multiplier

What It Means

The gross rent multiplier (GRM) is a simple method by which you can estimate the market value of an income property. The GRM is a market-driven measurement. You presume that, if buyers have recently been paying X times the gross income for properties in a certain location, then the market value of a property you are considering for purchase should work out to that same “X times” its gross income.

The advantage of the GRM is that it is so easy to calculate. You don’t need a computer; you probably don’t even need the back of an envelope, but rather can do the math in your head. The disadvantage is that nothing so basic is likely to be extraordinarily accurate or reliable. GRM ignores ...

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