In real estate investing, the GRM is one investment metric that can be used when considering the purchase of an investment property. The GRM is simply as follows: take the sales price, divided by the monthly rents.
In the example below, the sales price is $235,000. The monthly rents are $1,730. The GRM would be 135.84. A good rule of thumb for investment properties is to keep the GRM under 100.
Here is another calculation you can do with GRM. Suppose you have determined that the average GRM for comparable sold properties in the area is 115. You can now create one estimate of value by multiplying the GRM by the average monthly rents. In the example below, the monthly rents are $1,730, and the GRM of the comparable properties is 115. Multiply these two together, and we have an estimated value $198,950.
Now estimating value with GRM is a pretty rough and crude guess of value. A better way to calculate value is to estimate values using a CAP RATE.
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