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Gross Rent Multiplier (GRM):
Gross Rent Multiplier (GRM) is a simple way to compare different properties by looking at how much money they make from rent. To find the GRM, you take the total cost of a property and divide it by the amount of money it makes in rent each month or year. This number helps you figure out which properties are better deals when you're choosing between them.
GRM = Property Sale Price / Gross Rent (monthly or annual)
- Property Sale Price is the total cost of the property.
- Gross Rent is the total rent the property generates, either on a monthly or annual basis.
For example, let's say you have two properties. Property A costs $100,000 and makes $1,000 in rent each month. Property B costs $150,000 and makes $1,500 in rent each month. To find the GRM for each property, you would do the following calculations:
Property A: $100,000 / $1,000 = 100 (monthly GRM)
Property B: $150,000 / $1,500 = 100 (monthly GRM)
In this case, both properties have the same GRM, so they are equally good deals.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In the land of houses and rent,
Where buyers compare, seeking content,
A magical number called GRM we invent.
Take the price of a house, you see,
And divide it by rent, easy as can be,
The answer you get is a number so fine,
It helps you compare, so you won't waste time.
Two houses may differ in price,
But the GRM will show you in a trice,
Which property's deal is better and nice.
So when you're out hunting, a house to acquire,
Keep the Gross Rent Multiplier in mind,
And the best property deals, you'll surely find.