Gross Rent Multiplier (GRM)

Gross rent multiplier (GRM) is a property's purchase price divided by its gross annual rent — a quick screening ratio for rental deals.

Gross rent multiplier — GRM — is a property's price divided by its gross annual rent. A house priced at $120,000 that collects $15,000 a year in rent has a GRM of 8. Lower is cheaper: the buyer is paying fewer years of gross rent for the property. It is the fastest screen in rental math — two numbers, one division, no expense data required.

That simplicity is the point and the limitation. GRM is useful for sorting a stack of potential deals in the same market: if most rentals in an area trade around a GRM of 9 and one is sitting at 6.5, that deal deserves a closer look. It is also the mirror image of gross yield — a GRM of 8 is the same fact as a 12.5% gross yield, stated the other way around.

What beginners get wrong is promoting GRM from a screen to a decision. Gross rent ignores everything that determines whether a rental actually makes money: taxes, insurance, condition, management, vacancy, and capital expenses. Two properties with identical GRMs can sit on opposite ends of the performance spectrum — one with new systems and a paying tenant, the other a deferred-maintenance money pit with the same rent on paper. Use GRM to decide which deals are worth underwriting, then switch to NOI, cap rate, and cash flow before any money moves.