Floor Area

Floor area is the measured area of a building's floors, the figure behind price per square foot and rent per square foot. Price per square foot and gross rent multiplier are the two quick comparisons investors reach for. They answer different questions: one prices the space, the other prices the income.

Two properties can match on one and diverge on the other. A 2,000 square foot house at $500,000 is $250 a square foot. If it rents for $4,000 its GRM is 10.4. A 1,600 square foot house nearby at $400,000 is also $250 a square foot, but if it rents for $3,500, its GRM is 9.5 and it earns more rent per dollar.

Rent per square foot is the link between them. Divide the price per square foot by annual rent per square foot and you get the GRM. When a property looks cheap per square foot and expensive on GRM, the rent is low for its size, which may be an opportunity or a sign of a layout tenants do not want.

Further reading: Floor Area on Wikipedia.