GRM (Gross Rent Multiplier)
GRM is the purchase price divided by annual gross rent. It answers: how many years of gross rent does it take to equal the purchase price? Lower is better — it means you are paying fewer years' worth of rent for the property.
GRM is the fastest income-property screening metric. You can calculate it mentally on any listing in seconds. Its limitation: it ignores every expense, vacancy, and financing cost. It screens for value, not profitability.
The formula
Or equivalently:
| Input | Notes |
|---|---|
| Purchase price | What you pay, not asking price |
| Annual gross rent | Monthly rent × 12 (fully occupied, before any expenses) |
Worked example
Two properties with the same monthly rent:
| Property | Price | Monthly rent | Annual gross rent | GRM |
|---|---|---|---|---|
| A | $160,000 | $1,800 | $21,600 | 7.4 |
| B | $220,000 | $1,800 | $21,600 | 10.2 |
Property A costs 7.4 years of gross rent. Property B costs 10.2 years of the same rent. Property A is clearly the better value ratio — which is why GRM is useful as a first filter.
GRM benchmarks
GRM varies significantly by market and property type:
| GRM range | General interpretation |
|---|---|
| Below 6 | Very strong income relative to price; verify assumptions and market |
| 6–9 | Solid range for cash-flow-oriented markets |
| 9–12 | Moderate; analysis required to confirm cash flow |
| 12–15 | Thin income yield; appreciation-dependent market |
| Above 15 | Typical of coastal / high-cost markets; unlikely to cash flow at standard leverage |
These are rough reference points. A GRM of 10 in Dallas means something different than a GRM of 10 in San Francisco. Always compare within the same market and property type.
GRM vs. cap rate: which to use
| Metric | Formula | Includes expenses? | Includes vacancy? | Speed |
|---|---|---|---|---|
| GRM | Price ÷ Annual gross rent | No | No | Fastest |
| Cap rate | NOI ÷ Price | Yes | Yes | Slower (needs full NOI) |
GRM is a 10-second screen. Cap rate is a 10-minute analysis. Use GRM to decide whether a property is worth analyzing. Then build a full NOI and cap rate calculation to decide whether it is worth pursuing.
A property with an excellent GRM may have poor cap rate if expenses are unusually high (very old property, high tax market, expensive management). A property with a mediocre GRM may have a reasonable cap rate in a low-tax market.
Working backwards: setting a price ceiling with GRM
Once you know the target GRM for your market, you can reverse the formula:
Example: target GRM of 8 for your market, property rents for $1,800/month:
| Calculation | Amount |
|---|---|
| Annual gross rent | $21,600 |
| Target GRM | × 8 |
| Maximum price at target GRM | $172,800 |
If the seller is asking $215,000, the deal fails your GRM screen before you even look at expenses. You either negotiate to $172,800 or move on.
GRM for multifamily screening
GRM is particularly useful for quickly comparing multifamily deals. A 10-unit building at $750,000 renting for $7,200/month ($86,400/year) has a GRM of 8.7. Compare multiple 10-unit buildings on GRM before doing full underwriting on the two or three best.
Common mistakes
1. Using listed rent instead of market rent. If the property is vacant or underrented, listed rent is not market rent. Use comparable rentals to verify.
2. Using GRM as the final analysis. GRM tells you nothing about expenses, vacancy, or financing. A deal that passes the GRM screen still needs a full pro forma before you make an offer.
3. Comparing GRM across different property types. Commercial properties, multifamily, and single-family rentals have different typical GRM ranges. Only compare within the same asset class.
Frequently asked questions
What is a good GRM for a single-family rental? It varies by market. In cash-flow markets (Midwest, Southeast), a GRM of 7–9 is common and reasonable. In appreciation markets (coastal metros), GRMs of 15–25+ are common and expected. The absolute number matters less than how it compares to other properties in the same market.
How does GRM relate to the 1% rule? The 1% rule says monthly rent ≥ 1% of price. A property at exactly 1% has: Annual rent = 12% of price. GRM = Price ÷ (Price × 12%) = 8.33. So the 1% rule corresponds to a GRM of about 8.33 or lower. The two heuristics measure the same thing differently.
Should I use gross rent or net rent for GRM? Always gross rent (before expenses). Using net income is cap rate, not GRM. Keep them separate.
GRM is a screening heuristic, not investment advice. Always perform full underwriting before making a purchase decision.