Gross Rent Multiplier

In depth

Gross Rent Multiplier (GRM) equals purchase price divided by gross annual rent. A $200,000 property renting for $24,000 per year has a GRM of 8.33. Lower GRMs indicate better deals, all else equal. Misconception: GRM is not a return metric; it ignores expenses, vacancies, financing, and capital costs. Practically, in seller-financed deals, GRM is a quick screen to identify promising properties before deeper underwriting. Stable rental markets often see residential GRMs between 7 and 13. Comparing GRM across properties in the same market helps identify outliers worth deeper analysis. After initial screening, investors move to NOI-based cap rate analysis and full pro formas. FSBO sellers should know their property's GRM relative to market when pricing.