I recently modified an article I wrote several years ago that defines cap rate and gross rent multiplier (GRM) in order to conclude which best determines rental property value and measures financial performance. The article has been posted on our ProAPOD website on our Articles page. Here’s are some excerpts:
“…cap rate and GRM are used by sellers to set a selling price for rental properties, and by buyers trying to determine what price to offer.
“So which is better? At the end of the day, which method of estimating a rental property’s value best measures the property’s financial performance and therein promotes a smarter investment decision?
“In this article, we’ll consider both, and then decide.”