Flipping

Flipping is buying a property, usually to renovate, and reselling it quickly for a profit. A flipper is paid by the resale price, not by rent, so gross rent multiplier is rarely part of the plan. It matters when the likely buyer is a landlord.

In neighborhoods where most buyers are owner-occupants, resale price follows finishes and comparable home sales. Where most buyers are investors, the resale price follows rent. A renovated rental that will rent for $4,000 a month in a market that trades at a GRM of 10 is likely to sell near $480,000, however nice the countertops are.

Checking the market GRM before buying a flip in an investor-heavy area sets a realistic ceiling on resale. If the planned sale price requires a multiple well above recent rental comps, the flip depends on finding an owner-occupant buyer who will pay more.

Further reading: Flipping on Wikipedia.