I collect the sales data on all four-plexes sold within Ada County. I then make some calculations to find certain market indicators. One of the easiest, is Gross Rent Multiplier (GRM).
Currently the average GRM is 113 times the monthly gross rental income. If the gross monthly rent is $2,800 a ballpark value would be about $316,400 (2,800 X 113 = $316,400). GRM is a quick way to obtain a ballpark value, and it can easily vary depending on the Net Operating Income (NOI). NOI divided by value or sales price, calculates the Capitalization Rate or often referred to as the "cap." Typically buyers prefer to see higher cap rates because that indicates that the NOI is high in comparison to value. It's not always the case, but as cap rates decline, it typically means values have increased. Anything affecting NOI, will affect the cap rate.
Today, most four-plex buyers are looking for a minimum of a 6% cap. This is slightly up from where we were last summer and I believe that is mostly due to increased rents which reflect a higher NOI. If you have interest in buying or selling, I'd be happy to go over some of these in a format that simplifies it and makes it much easier to understand.
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