Investing in New Hampshire Mountain Property

Are you looking to invest in real estate in the North Conway NH area? An investment in White Mountain real estate can be analogous to investing in ocean front real estate—there is only so much ocean front and only so much developed or developable mountain property around. In addition to our natural beauty and unique mountain setting, the Mt Washington Valley is also a year round tourist destination, providing further protection of your investment.

Listen to NAR President discuss the current real estate investment opportunities.

The following information is updated monthly to help your research of investment opportunities here in the NH White Mountains:

Market Stats:

JUNE 2008 to JUNE 2007 Comparative figures:

 
June 2008
June 2007
New Listings
429
454
Back on Market
98
108
Pending
92
102
Contingent
68
51
Expired
167
208
Withdrawn
71
68
Sold
82
110
Avg Sold $
$233,792
$213,551
Days on Market
189
160
Median Sold $
$191,000
$178,250

 

Consider the following article on an important ratio to help estimate the value of income producing properties. Use this as a guide when researching the many White Mountain investment properties in and around North Conway, NH.

GROSS RENT MULTIPLIER – GRM

The Gross Rent Multiplier or GRM is a ratio that is used to estimate the value of income producing properties. The GRM provides a rough estimate of value. Only two pieces of financial information are required to caluculate the Gross Rent Multiplier for a property, the sales price and the total gross rents possible. If this information is available for multiple recent sales of similar types of income properties in a particular area, it can then be used to estimate the market value of other similar properties in that area. Some investors use a monthly Gross Rent Multiplier and some a Yearly GRM. The monthly Gross Rent Multiplier is equal to the Sales Price of a property divided by the potential monthly rental income and the Yearly GRM is the Sales Price divided by the yearly potential rental income.

Example 1: If the sales price for a property is $200,000 and the monthly potential rental income for a property is $2,500, the GRM is equal to 80. Monthly potential rental income is equal to the full occupancy monthly rental amount which assumes all available rental units are occupied. Generally speaking, properties in prime locations have higher GRMs than properties in less desirable locations. When comparing similar properties in the same area or location, the lower the GRM, the more profitable the property. This statement assumes that operating expenses are proportionate for the properties being compared. Since the GRM calculation doesn’t include operating expenses, this statement might not hold true for similar properties where one of the properties has significantly higher operating expenses.

Sales Price $200,000
GRM (Monthly) ___________________ = ______________ = 80
Monthly Potential Gross Income $2,500

Example 2: We have several similar properties that have sold recently in the same area and their average monthly GRM is 80. We can use this information to estimate the value of comparable properties for sale. If our monthly potential gross income for a property is equal to $3,000, we would estimate its value in the following way.

Estimated Market Value = GRM X Potential Gross Income

= 80 x $3,000 = $240,000

A market GRM can provide a rough estimate of value, but it does have some limitations. The GRM calculation doesn’t include a proeprty’s operating expenses and vacancy factor. We could have a situation where two properties have approximately the same potential rental income, but one property has significantly higher operating expenses. The above formula would result in a questionable estimation of the market value for these properties. Also, the above GRM formula uses the monthly potential rental income and doesn’t account for a vacancy factor which could have an impact on the accuracy of the property value estimates. The seasoned investor understands the above limiations and uses the gross rent multiplier to get a quick feel for the potential market value of an income property.

The GRM is sometimes calculated using the effective gross income rather then the potential rental income thus incorporating the vacancy factor in the GRM calculation. Effective gross income equals potential rental incomes minus the vacancy amount. When vacancy rates are a factor, using the effective gross income will produce a more reliable estimate.

The capitalization rate is a more reliable tool for estimating the value of income producing properties since vacancy amount and operating expenses are included in the cap rate calculation. The GRM is useful in providing a rough estimate of value.