What is the gross rent multiplier?
The gross rent multiplier (GRM) is a property’s price divided by its gross yearly rent. It tells you how many years of rent it would take to pay the price, before any expenses.
A lower GRM means you’re paying less for each dollar of rent, which is better for a buyer. Because it ignores expenses, it works best for comparing similar properties in the same area, not for judging a deal on its own.
Worked example
A duplex listed at $360,000 rents for $3,300 a month in total:
- Yearly rent: $3,300 × 12 = $39,600
- GRM: $360,000 ÷ $39,600 = 9.09
If similar duplexes nearby sold at a GRM of about 9, this one is priced about in line, just slightly high. At a GRM of 9 it would be worth about $356,400, so it’s roughly $3,600 above the area’s going rate.
How to use GRM
- To screen listings. Work out the GRM of recent sales nearby, then skip listings that are well above it.
- To estimate value. Multiply a property’s yearly rent by the area’s typical GRM for a ballpark price.
- To spot outliers. A much lower GRM than its neighbors can mean a bargain, or a property with high expenses, deferred repairs or below-market rents. Find out which.
GRM vs. cap rate
GRM uses gross rent; cap rate uses net operating income after vacancy and expenses. Two buildings with the same GRM can have very different cap rates if one has much higher taxes or the owner pays heat. Use GRM to screen, then the cap rate calculator once you know the expenses.
Frequently asked questions
What is a good GRM?
Lower is better for a buyer, but “good” depends on the market. Compare with similar properties that sold recently nearby rather than a national number.
Should I use current rent or market rent?
Use current rent to see what you’re buying today, and market rent to see the potential. If the two are far apart, find out why before counting on raises.
How is GRM related to the 1% rule?
They’re two views of the same ratio. Passing the 1% rule means a GRM of about 8.3 or lower. Try the 1% rule calculator.
Where do I find nearby GRMs?
Ask a local agent for recent sales of rentals with their rents, or check listings that show both price and rent roll.
Run the real numbers
GRM is a screen, not an analysis. ElmCheck’s free deal analyzer takes the price and rent from here; add taxes, insurance and your loan to see cash flow, cap rate, cash-on-cash return and a buy, maybe or pass verdict.