Calculating Property Value Based on a Net Return Via Capitalization Rate The common measure of rental real estate value based on net return rather than gross rental income is the Capitalization Rate (or Cap Rate). In contrast to the GRM, the Cap Rate is not a multiplier but a rate of annual return.Before you can …
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What Is a Debt Coverage Ratio (DCR)? Debt Coverage Ratio (DCR), sometimes known as the Debt Service Coverage Ratio (DSCR), compares an investment property’s Net Operating Income (NOI) with its debt service.Lenders use this ratio to calculate whether or not you will be able to generate enough income to pay your debts. Most commercial lenders …
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WHAT IS GROSS RENT MULTIPLIER? The ratio of a property’s price to gross rental income. It tells you how long it will take for an investment property to pay for itself. For a prospective real estate investor, a lower Gross Rent Multiplier (“GRM”) represents a better investment opportunity. Similar to other property valuation methods, GRM is effective …