To calculate the GRM, divide the estimated value of the property by its annual effective gross rental income. I prefer using an annual GRM instead of the monthly version. Effective gross rental income refers to the actual rental income that was collected with the vacancy and credit loss factored in, and not the potential gross income. For example, a small, six-unit rental property with an estimated value of $250,000 and a gross annual rental income of $36,000 would have an annual GRM of 7 when rounded up to the next whole number ($250,000 $36,000 = 6.94). In most markets, investors need a GRM between 7 and 10 to earn a reasonable profit.
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