Gross Rent Multipliers in Vancouver, Washington
Recently questions have come my way about Gross Rent Multipliers (GRM) on single family houses. Far fewer houses are renter occupied than owner occupied. And, there are relatively few sales of houses that are rented when sold. The GRM is developed by dividing the rent into the sales price. All the data presented here was on a monthly basis, so they are Monthly Gross Rent Multipliers.
All the data examined had Vancouver addresses and sales prices under $300,000. Several categories were looked at. First, houses newer than 1990 that sold in 2006 were looked at. They presented a wide range of GRM from 186.25 to 247.90. The average was 226.84. At the low end was a ranch style built in 1994 getting $1,200 rent. At the upper end was a 1994 model, two story getting $1,000 rent. There is a lot of variation in the rent levels of these houses. And, the GRM is a measure of the relationship of rent to sales price. Sales prices of the houses are fairly consistent for their size and quality. It is the rents that vary most.
Looking at a similar data set that all sold in 2007, presented a range of GRM from 193.03 to 236.08. The average was 213.14.
I also looked at a group of older houses that all sold in 2006 while rented. They showed a range of 195.38 to 246.43 GRM. They had an average of 216.62.
A group of attached houses all newer than 1990 that sold in 2007 were looked at. The presented a GRM range of 185.56 to 220.00. The average was 203.22.
Concluding, there was an average GRM of 226.84 for newer houses sold in 2006. There was an average GRM of 213.14 for newer houses sold in 2007. The newer attached houses had an average GRM of 203.22.
It appears that the average GRM has dropped a bit in the last year. The GRM’s were pushed up a lot by rapidly rising residential housing prices, while rents lagged behind. A landlord can not simply raise the rent to get higher returns on their property. They would likely end up with higher vacancy, which is self defeating. Rents have been rising, but not as fast as prices.
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