Bridgeport Target Returns? by Gross Rent Multiple

[Christopher Collins]

What do investors in Bridgeport target for first year gross rent multiple (GRM)?

I am used to a gross rent multiple target of around 8.6 for places in Stamford but in Bridgeport that seems to be very easy to get. Based on historical appreciation Bridgeport lags Fairfield and has higher taxes so you would expect a lower G.R.M., but what seems to be the current going GRM in Bridgeport?

Thanks,
Chris

[Jonathan Makovsky]

@Christopher Collins Personally I am not a big fan of Gross Rent Multiplier ("GRM").***

GRM is strictly a function of Revenue, where as Cap-Rates (my preference in evaluating a deal) takes into account Operating Expenses ("OpEx").

I think this is especially important Connecticut where OpEx can be high because of 1) high taxes [especially in Bridgeport], 2) the majority of properties are old (requiring more for both reserves and ongoing repairs), and 3) the high cost of labor/service contracts in the state.

That being said - and somewhat contrary to the above - many commercial brokers in CT of mid to large multi-families typically trade properties on a price per unit basis (and the price will fluctuate depending where in B-port).

***Exception to GRM: If you are an experienced investor and understand a certain area and/or have excellent operations then GRM can be a good measure to use. Because if you have strong operations in place and can scale your OpEx (for example, if you have an in-house management company and your expenses are typically fixed no matter how many units you own for contractors, leasing agents, etc.) then you might only be concerned with the rent since your expenses are more-or-less fixed.