How to Evaluate Rental Property Like a Pro
How Joe and Kelly Used Cap Rate and GRM to Buy a Smart Investment Property in Woodstock
Investing in a multi-unit property can be a powerful way to build long-term wealth, but success comes down to understanding the numbers. Two key metrics, Cap Rate and Gross Rent Multiplier (GRM), help investors determine whether a property is a strong investment or just looks good on paper.
Joe and Kelly were ready to expand their real estate portfolio, but they weren’t looking for just any rental. They wanted a cash-flowing property in a desirable location that made financial sense from day one. By analyzing the numbers, they found and purchased a Craftsman triplex in Woodstock, securing a rental investment with steady income and long-term appreciation potential.
Finding the Right Multi-Unit Property
Joe and Kelly’s investment goals were clear:
Cash flow from the start – Reliable rental income to cover costs and generate profit.
A desirable location – A neighborhood with strong tenant demand, walkability, and good amenities.
A property with character – Something with Portland charm, not just another rental.
When they came across a large Craftsman triplex in Woodstock, it seemed like the perfect fit. But before moving forward, they needed to run the numbers to be sure it was a sound investment.
Breaking Down the Numbers: Cap Rate & GRM
Cap Rate: 7.17%
Cap Rate (Capitalization Rate) measures a property's return based on its net operating income (NOI). Investors use this figure to assess whether a rental property generates strong income relative to its purchase price.
Formula:
Cap Rate = (Net Operating Income ÷ Property Value) × 100
Joe and Kelly’s numbers:
Rental Income: $84,000 per year
Operating Expenses: $24,000 (property taxes, maintenance, insurance, and management fees)
Net Operating Income (NOI): $60,000
Purchase Price: $837,000
Cap Rate = (60,000 ÷ 837,000) × 100 = 7.17%
A 7.17% Cap Rate is strong for Portland, where most multi-unit properties in high-demand areas range between 4-6%. This meant Joe and Kelly’s triplex was not just a long-term appreciation play—it was producing strong rental income right away.
Of course, Cap Rate isn’t the only factor to consider. A higher Cap Rate can mean a higher potential return but may also come with higher risk—often seen in older buildings or properties in transitional neighborhoods. A lower Cap Rate usually signals a more stable investment but with lower immediate returns, typical of newer properties or those in prime locations. Joe and Kelly found the sweet spot—strong rental income now, plus the potential for appreciation over time.
GRM: 11.29
Gross Rent Multiplier (GRM) helps investors quickly assess a property’s value based on its rental income. It calculates how many years it would take for the property’s total gross rent to match the purchase price—offering a quick way to compare properties before factoring in expenses.
Formula:
GRM = Property Price ÷ Annual Gross Rental Income
Joe and Kelly’s numbers:
GRM = 837,000 ÷ 84,000 = 11.29
What This Meant for Joe & Kelly
8-10 GRM → A strong deal with high rental income relative to price.
11-12 GRM → Fair market value and a solid long-term investment.
13+ GRM → A higher purchase price relative to rental income, often seen in appreciating areas.
With a GRM of 11.29, their Woodstock triplex was priced fairly for its rental income while still leaving room for future rent growth.
When to Use Cap Rate vs. GRM
GRM is best for quickly comparing properties based on gross rental income. It’s a useful starting point but doesn’t factor in operating expenses.
Cap Rate provides a more detailed view of profitability by accounting for expenses like taxes, maintenance, and management.
In Joe and Kelly’s case, GRM confirmed the property was priced appropriately, while Cap Rate showed it was generating solid cash flow. By looking at both metrics, they ensured they were making a smart investment.
Final Steps Before Buying
Numbers are critical, but they don’t tell the whole story. Joe and Kelly took extra steps to protect their investment:
Checked Market Rents – Compared rents to other triplexes in Woodstock to ensure tenants weren’t underpaying.
Reviewed Expenses – Verified that property taxes, maintenance, and insurance costs were realistic.
Researched Neighborhood Trends – Woodstock was seeing new development, meaning property values could rise.
Looked for Value-Add Potential – The triplex had a basement with extra storage that could potentially be converted into rentable space.
Everything lined up, so they made a strong offer—and won.
Why This Property Was a Smart Investment
Joe and Kelly’s Woodstock triplex checked all the boxes:
Immediate cash flow with a 7.17% Cap Rate.
A fair purchase price with an 11.29 GRM.
Appreciation potential in a growing neighborhood.
Classic Portland character that attracts long-term tenants.
Now, their investment is generating steady income, and they’re already planning for their next rental property.
Thinking About Buying a Multi-Unit Property in Portland?
Finding the right multi-unit investment takes more than just searching listings—it requires a strategy and a deep understanding of the numbers. If you’re considering a duplex, triplex, or multi-family home, we can help analyze the data and identify a property that fits your goals.
Kim Campbell & Francisco Salgado
At Campbell Salgado Real Estate Group, we believe smart investing starts with understanding the numbers and market trends.
With deep experience in Portland’s real estate landscape, we guide our clients through every step of the buying process—whether you’re purchasing your first home or expanding your rental portfolio. We take pride in helping investors find properties that balance cash flow, appreciation, and long-term value. If you're thinking about buying an investment property in Portland, let's talk. Call or text us at 503-951-8547.
