In commercial multifamily real estate, there’s a language that is spoken when you are connecting with brokers, property managers and other investors in the profession. To avoid sounding like a novice, an investor must be fluent with the real estate terminology to be taken seriously. Let’s take a minute to breakdown one of those terms.
The gross rent multiplier also known as GRM is nothing but the number of years that an apartment takes to pay for itself based on the gross potential rent (GPR). The GRM can be derived by dividing the purchase price of an apartment by its annual GPR.
- For instance, a 100-unit apartment purchased for $6,00,000 with a GPR of $100,000 per month has a GRM of 5
- $100,000 * 12 = $1,200,000
- $6,000,000 / $1,200,000 = 5 years
- The number of years the property would take to pay for itself in gross received rent.
- Gross rent is annual rental income before deducting operating costs such as utilities, taxes, insurance, etc.
By learning these concepts and terms, you’re separating yourself from the novice investor looking to be more active than passive. Here’s where you can learn more multifamily investing terms.
