GRM – Gross Rent Multiplier / Factor
When investors talk about a “factor” in real estate investing, they usually mean a number that is used to calculate the value of a property.
For example, a common factor in real estate investing is the “gross rent multiplier” (GRM), which is a number that investors use to estimate the value of a property based on the amount of rent it brings in.
To calculate the GRM, you divide the price of the property by its annual rental income. For example, if a property costs $500,000 and brings in $50,000 in rent each year, the GRM would be 10. This would be a factor 10 property.
Investors use the GRM to compare different properties and determine which ones are a good value. A lower GRM means the property is a better value because it brings in more rental income compared to its price. It´s a quick estimate to categorize investment properties, it does not take into account all expenses and details, so be careful when using this for your decision making.
So, in short, a “factor” in real estate investing is a number that helps investors calculate the value of a property based on various factors like rental income, expenses, and market conditions.