Gross Rent Multiplier Calculation

[Brian Willard]

I'm trying to understand my numbers. I ran a BRRRR report and it was laid out the following:

ARV $275,000

Estimated Repairs $17,250

Purchase Price of $175,250 (70% of ARV - repairs)

Assumed Gross Annual Scheduled Income $$28,200

I notice the Gross Rent Multiplier is calculated based on purchase price. Correct me if I'm wrong, but GRM is calculated by dividing the market value of the property by the gross scheduled income, not taking into account expenses and vacancy rates.

If I'm buying a property at $175,250 but the market value of the property is $275,000 (ARV) shouldn't the GRM be based on this, rather than my purchase price?

Currently it's giving me a GRM of 6.21 assuming $28,200 gross annual scheduled income. However, using the ARV as the market value, I would have a GRM of 9.75.

Like I said, if my understanding is correct, the latter should be the GRM. If I'm not correct, could you explain why I should use the purchase price?