Definition
The gross rent multiplier is a simple valuation measure equal to a property's price divided by its annual gross rental income.
How It Works
GRM equals purchase price divided by annual gross rent. A lower GRM suggests a quicker payback relative to rent. Like the 1% rule, it is a fast comparison tool that ignores expenses.
Example
A $1 million property with $100,000 of annual gross rent has a GRM of 10.
When It Works Best
It is most useful for quickly comparing similar income properties in the same market.
Who It Applies To
Real estate investors screening deals.
Watch-Outs
Because it uses gross rather than net income, GRM ignores operating costs and is only a rough screen.
