Gross Rent Multiplier (GRM)
It is how many years of gross rent it would take to equal the purchase price — a quick price sanity check.
Formal definition
Gross rent multiplier equals property purchase price divided by annual gross rental income.
Why it matters
Lower GRM usually means more rent per dollar paid; investors use it for fast comp shopping before deep underwriting.
Where you see it
- Residential acquisition spreadsheets
- Real estate agent CMA supplements
- Small multifamily broker packages
- Investor rule-of-thumb screens
- Rental property podcasts
Worked example
- Purchase price: $240,000.
- Annual gross rent: $24,000.
- GRM = $240,000 ÷ $24,000 = 10.
- Interpretation: Price equals 10 years of gross rent before expenses.
How Business metrics calculates it
Purchase price ÷ Annual gross rent.
Where people fool themselves
GRM using asking rent on a vacant building is a listing tactic. Use in-place rent if you are buying an operating asset.
Run it on your own numbers: the Residential Rental calculator.