Gross Rent Multiplier (GRM)
Also called: GRM
The ratio of a property's purchase price to its gross annual rental income, used as a quick valuation screen.
GRM = Purchase Price / Annual Gross Rental Income
Full definition
GRM is the fastest back-of-envelope test for whether a rental property is reasonably priced. A $250,000 property renting for $2,000/month has a GRM of 10.4 ($250,000 / $24,000). Lower GRM generally indicates a better deal, though it ignores expenses and vacancy. Most investors use GRM as an initial screen (reject anything above ~14 in most markets), then move to cap rate and DSCR for serious analysis.
Used for
- initial deal screening
- market comparison
- portfolio valuation
Sources
Related SailsAndShore resources
Workbooks
- Real Estate Investor Portfolio · $8.63
Free calculators
- Cap Rate Calculator — Type in the numbers. Get the cap rate. Decide if it pencils.
Free to reference or cite in research and articles. Preferred citation: https://sailsandshore.com/glossary/gross-rent-multiplier