Cap Rate vs. Gross Rent Multiplier
“What’s the difference between a cap rate and the gross rent multiplier?”
***ANSWER:
Cap rate is the opposite of a price/earnings ratio, used with stocks. Here are some random cap rates and GRMs in San Diego:
CapGRM Area
415 Pacific Beach
513 North Park
5.312 El Cajon
As you can see, as cap rates go up, gross rent multiplier goes down.
Generally speaking…
When you buy, you want a high cap and low GRM.
When you sell, you want a low cap and high GRM.
Hope that makes sense!
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