• Mike Wagner

What is a GRM and Why Should Every Storage Investor Know How to Use It?

Self Storage Investing like all investing, is a numbers game. As such, there are a bunch of

formulas that come in handy when you are out there trying to find your first or next

storage deal. One of the formulas that I use first whenever I am trying to figure out

if a particular property has potential is something called the GROSS RENT

MULTIPLIER (or GRM for short). The gross rent multiplier is probably the most

simplistic formula that I can share with you. But don't let that fool you. It is also

incredibly helpful. I use it all the time; And it can be very useful in understanding

the metrics of any property whether it be an existing property, a conversion play or

ground up development. It can also help you fill in missing pieces when you don't

yet have all the data you'd like to have to properly analyze a property. The formula

itself is quite simple. Boiled down, the gross rent multiplier or GRM is found by

dividing the purchase price by the gross annual rents. Let's look at a quick

example. Let's say a small property has an asking price of $213,000 and that the

gross potential annual rent (the most money the property could bring if completely

full throughout the year) is $60,000. $213,000 divided by 60,000 is 3.55.

Ok, so that doesn't mean too much unless we know what a “good GRM” is, right? Based on my experience buying millions of dollars in storage over the last 8 years, I will tell you

that a GRM less than 5 peaks my interest. At that level, I'm not jumping out of my

chair but I am intrigued. There could be some potential and I will usually poke

around a little more to see if the scales start to tip toward or way from the deal.

Once the GRM dips below 4 though, it becomes very interesting to me. Diving too deep into

why exactly that is, is a bit beyond the scope of this humble little blog of mine but It

relates to the way this number, the GRM, relates to the other industry standards

that exist (things like income:expense ratio which I've explored in a prior post).

Simply put, when you have a GRM under four, the ROI is likely going to be pretty

darn healthy!

Hopefully that makes sense. It's relatively straightforward. But again, don't let that fool you. We can apply this formula in a lot of ways. For instance, if we are looking at a

property where the owner wants us to make an offer without presenting an asking

price (annoying but it does happen), we can use our target GRM to reverse

engineer a ballpark value for the property. Perhaps I will explore this idea more in

depth in a future post. In the meantime, I hope you found this helpful and invite

you to join me and a bunch of other Storage Investors in a Private Membership

Site that we have. You can gain instant access to a bunch of FREE Video content

right now (including a deeper dive into a more sophisticated application of GRM)

by enrolling in The Storage Rebellion University. Click here to learn more


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