Just a few critical clarifications and caveats to add here: 1. calculating GRM…is that based on the actual gross or the projected stabilized gross? That’s not spelled out. 2. GRM is a top line number and really says nothing about overall profitability property to property as no two or three are the same. For my money, I am more concerned with gauging profitability; and 3. if the subject property requires certain capital improvements and/or has for some reason a higher operating expense ratio, the GRM is unreliable from the get go and it often leads to a poor investment decision. After nearly 30 years of experience, GRM’s should only be used by experienced investors with trusted A+ data and a strong understanding of points 1-3 in mind.

As for developing cap rates in slam dunk fashion as outlined, well it’s really not that simple Bobby – ask any CRE appraiser. And it doesn’t end there…in a room with 10 brokers, appraisers, investors, etc. you can get 10 different cap rates on the same property. There simply aren’t enough market transactions to extract cap rates and enough reliable invetsor sentiment/surveys available to make it a straight-forward process. Consequently, developing a supportable cap rate in this market is extremely difficult and takes expertise.

Joe