From the course: Pre-investing: Before Investing in Real Estate
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The income approach to valuation - Microsoft Excel Tutorial
From the course: Pre-investing: Before Investing in Real Estate
The income approach to valuation
- The income approach is an appraisal technique that is often called the Gross Rent Multiplier, or the GRM. Now to calculate the GRM, you need to know the monthly rents and sales prices of similar properties that have sold recently. For this reason, the method only works for income-producing properties. Let's take a look at an example here and see how that differs from the comparable sales approach. Okay, welcome back. Now we're going to look at the income approach. So it's going to look kind of similar to the comparable sales because, well, we need to have comps in order to calculate this as well. So the difference here is we use the comp information in a different way. We calculate what are called GRMs, the Gross Rent Multipliers, and then use that to calculate the value. So up top, we have the same information. We have all of this is this exact same information. But instead of just using the per square foot based on the sales and making adjustments, what we're going to be doing is…
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