Financial Indicators For Commercial Income Properties:
Gross Rent Multiplier (GRM)
Price of the Property Divided by the Gross Potential Income (GPI)
PRICE ÷ GPI = GRM
What Does This DOWN & DIRTY INDICATOR Tell You ???
3.5X to 4.5X = Low Income Property
4.5X to 6.5X = Median Income Property
6.5X to 8.5X = Upper Income Property
For low income property , since the price is low the GPI (Total Potential Rent) divided into the price will produce a small number. As the price of the property increases the GRM generally increases.
For Gross Leased Office Buildings:
5.5X to 6.5X = Class C
6.5X to 7.0X = Class B
7.0X to 8.5X = Class A
Modified Net or Gross Leases will cause the multipliers to vary. When we have a Net Lease (Sometimes referred to as a Net, Net, Net Lease) the GRM will have no meaning.