A GRM (Gross Rent Multiplier) is calculated by taking the sales price of the property, and dividing it by the monthly rent. (Basic information on GRM is here: http://www.tonymassey.com/what-is-cap-rate-and-grm
Quite simply, as the GRM goes higher, the property purchase price goes higher. As the GRM goes lower, the property purchase price goes lower, assuming the rent was equal. As with any investment, it is usually a goal to minimize expenses and investments, thereby helping to increase the return on investment.
Consider the following example properties where the potential monthly rents are $1,000 a month, and the GRM's are known. The purchase price can be calculated by multiplying the rents and the GRM together.
Which would you buy?
Property A: GRM of 94.87
Property B: GRM of 121.84
Property C: GRM of 158.32
Property D: GRM of 348.61
The clear winner in this example is Property A, (strictly from a numbers prospective) because the purchase price can be calculated at $94,870. The purchase price for property B is $121,840. The purchase price for property C is $158,320 and the purchase price for property D is $348,610.
Here is another reason why Property A might be a clear winner. Lets assume you bought the property with cash, and after expenses, had 30% of the rents left over. What would your annual return be?
There may be good reasons why an investor would buy property B, C, or D. For instance, all of those properties might have better features than A, or might be in a better location than A. Some investors need a place to dump a lot of capital, where they won't lose the capital, and the return is not as important. For this particular investor, property D may in fact be the best choice.
Here are a couple more examples. Both the GRM and the rents are different in these examples.
Additional Matches: Why the GRM should be below 100?
Please view this disclaimer about this page.
Thank-You for writing. You should always honor all contracts that you are a party to. A mortgage is a contract and should be honored. You should make any and all mortgage payments and adhere to all terms of your mortgage until the terms of it are completely met.
Usually at closing, mortgages and other liens are paid off, but that may not entirely be the case, as there are short sales and other agreements that can be made to release the lien on title and allow for the sale of the property, but keeps the loan intact.
It is also entirely possible that sale and closing of the property may not occur for a wide variety of reasons, so it is a safe bet to continue making mortgage payments.
Please view this disclaimer about this page.
There is no maximum offer. Anyone can offer any price for any property, provided they have or can obtain the funds to complete the transaction.
If you are getting a loan for the property, the lender will probably only lend 80-95% of what the property is worth, according to an appraisal.
An appraisal is highly recommended in order to determine the value of the property. Once the value is determined, an offer can be made accordingly.
A "General Rule" for investment properties is the offer should be 100 times the monthly rent that one can reasonably collect on the property. For example, if one determines that a reasonable rent for a property is $1,200 a month, the offer should be $120,000. It is hard to find a property and seller that will go with this, but you should try as hard as you can to get to or below 100x.
Please view this disclaimer about this page.
I have a homebuyers notebook that I made when I was in real estate. I gave the notebook to every buyer I encountered. It was my hope to educate my buyers on the buying process. I have removed most of the Colorado specific stuff from the book. There is basically an outline of the homebuying process, a lead based paint booklet, some important disclosures, and a list of questions to think about when buying a home. Please click here to view this homebuyer notebook.
BUYER BEWARE! Please be aware that I was an agent in Colorado, and some of the disclosures may be Colorado related. I left these in there so that you could be aware of some of the things you may wish to look for when buying a house. These are not an inclusive list of every bad thing with a house. These forms may not be accurate in every instance, and regulations, laws, or forms may have changed since I made the buyer notebook. If you need help with forms or legal advice, contact an attorney.
You will need a free program called Adobe Acrobat Reader to view the notebook. Most computers have it already. If your computer cannot open the notebook, please visit this site to get the reader: Get Adobe Acrobat Reader.
Please view this disclaimer about this page.
A good way to determine what rent to charge is by looking in the newspapers or on internet sites like craigslist to determine what others are asking for in their rents. Also, look on the internet for rental properties in your area. Do a google search. Hopefully you will hit a professional management company, and you can look at their rent prices. They are probably pretty accurate, as they do rental property management for a living.
If you are using a newspaper, you could also look for a bunch of ads that look similar to each other. For instance, a similarity would be the same phone number for all the ads. Sometimes they have three initials or so to denote their company name.
These ads that are similar to each other, may have been placed by a professional property management company.
In all cases, you should look for properties similar to yours. Once you find similar properties, just look through and see what the most common rents, and ignore numbers that are unusually high or low.
This gives you a rough guess on what kind of rents you will be able to receive.
If you are considering buying an investment property, A rule of thumb that could be used for an acceptable investment property would be that the purchase price you pay should be equal to or less than 100 rent payments. If it is more than 100, then you will have a lower return on your investment. There are certainly other variables, but this one is a start.
I also have many investment calculators to help you with your real estate investments at INVCALC.COM.
Please view this disclaimer about this page.
To calculate a vacancy percentage, based on gross scheduled income, and actual income received or projected do the following:
Determine Scheduled income using area rents.
Determine the actual amount of money you have received or project to receive.
Divide the actual amount by the scheduled amount. This number is called the “quotient.”
Subtract the quotient from 100.
This is your calculated vacancy rate.
Be sure to check out my quick rental calculator, which will help you calculate vacancy allowance, and more!
Please view this disclaimer about this page.
Hello, I purchased a home “by owner” this past August and just found out today from a plumber after having water backing up in my basement bathroom that I have a septic tank in my front yard and I believed my house was on city sewer service. The seller filled out the TN. property disclosure form that the house was on both city water and sewer. Now we find out that only the upstairs is plumbed to the city service. Could the seller be liable for our costs, since she lied on the disclosure form?
Get legal counsel. Call an attorney, ASAP!
Please view this disclaimer about this page.
We gave the seller (the Bank) an extension on the closing date for repairs, our agent informed us that they needed more time so she took our original extension paper and whited out the date and put in another date two weeks later and then told us about it after we asked about the house being ready on the date we had signed the extension for. Can she do that?
Your agent should not be making changes to contracts without your knowledge, consent and approval. That is wrong. Optimally, the parties making changes should initial next to the changes, or just draw up a whole new extension agreement. However, if you have given your agent a power of attorney or the agency agreement, or any other agreement between you and your agent allows it, it is possible that the agent could make the changes without your knowledge or approval. - so the answer is not completely cut and dry. If the changes are of concern to you, you should consult legal counsel and provide them with all papers that you have signed - and you should also get a copy of the document that your agent changed and provide that to your legal counsel as well.
Please view this disclaimer about this page.
Not necessarily. All titled owners must agree to the listing / sale of the home however. All owners must sign listing contracts, buy sell contracts, amendments, etc. Regardless, the loan must be paid off before the property is sold - because the real estate is collateral for the loan.
It is certainly possible to have owners of the real estate that are not the borrowers. Here is how it works. Buyers A and B buy the real estate - and get a loan for it. So buyer A and B are the titled owners, as well as the borrowers on the mortgage. Buyers Divorce. Buyer B quit claims to Owner A. Owner A and Owner C get married, and quit claim the property to themselves as a married couple. Owners divorce. Owner A quit claims their interest to Owner C. Owner C needs help with the payments and gets two buddies, Owner D, and E to move in and go on title.
So now, even though there still is a loan on the property, the property is no longer owned by the borrowers, A and B. It is owned by C, D, and E. So as you can see, a property can be owned by someone entirely different than the borrowers. However, since the loan is still on the property, owners C, D, and E must pay off the loan before the property is sold. (they could use sale proceeds at closing for instance). Now of course, if the lender finds out about C, D, and E, they could freak out and foreclose (if there was a restriction against property transfers).
Please view this disclaimer about this page.
The real estate transfer tax Colorado is one of the lowest in the United States. It is one cent per $100 of value, rounded up. For example a $250,000 property would incur a doc stamp fee of $25.00.
There are several municipalities that charge a real estate transfer tax in Colorado: Aspen 1.5%, Avon 2%, Breckenridge 1%, Crested Butte 3%, Frisco 1%, Gypsum 1%, Minturn 1%, Ophir 4%, Snowmass Village 1%, Telluride 3%, Vail 1%, and Winter Park 1%.
Please view this disclaimer about this page.
Additional Matches: What is doc stamp fee in Colorado? What is the documentary stamp fee in Colorado?