A few weeks ago I wrote about a two family in my city that was listed for over year at varying prices (699k, 539, 569k, 499k in that order). It finally went under agreement.

I plan to check domania when the dust settles to try to find out what was actually paid. Some back of the envelope calculations indicate that the final asking price was fair (but maybe a bit on the high side).

This house is in an expensive neighborhood - typically appartments there rent for $700 or more per bedroom - so a 3 bedroom would be over $2000/month.

This house had 5 bedrooms - so I assume a monthly income of about $3500 (it was not in the best location). This makes the gross yearly income 42k, giving this property a GRM (gross rental multiplier) of 499/42 or 11.9.

High - but not the nosebleed high of 16.6 based on the original asking price.

To put this in perspective, if we assume a reasonable 35% of gross income would go to non debt related expenses, this property, if paid off, would generate about 27k of income per year. At the 699k asking price this would have yielded a CAP rate of under 4% - less than folks can get by buying an apartment REIT on the stock exchange. At 499k the CAP rate is a still low 5.4% (but not crazy loony low anymore).

-fg mortgage calculator