- 1). Determine the average GRM of several similar properties for sale in your area, the more the better. You can obtain gross rental income, expenses and other information on commercial property for sale from the realty company handling the property--often they have a handout sheet with this information on it. For each property, divide the asking price by the annual gross rents (AGR). If a property sells for $500,000, and has an AGR of $70,000, the GRM equals $500,000 divided by $70,000, or 7.14. Let's assume that you determine the GRM for six or seven similar properties in your area, and that the average GRM equals 9.
- 2). Calculate the GRM for the property you contemplate buying. If the asking price equals $1,100,000 and AGR equals $90,000, the GRM equals 12.2. which exceeds the average GRM of 9.
- 3). Determine the appropriate value of your property---one that equals the average GRM for similar properties in your area. Multiply the AGR, $90,000, by the average GRM, 9. The result equals $810,000. In this instance, you might consider countering with an offer to buy the property at $810,000 or somewhat less, anticipating a counter-offer above your initial offer.
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