Gross Rent Multiplier (GRM)
A fast rental screen equal to a property's price divided by its gross annual rent. A lower GRM means a lower price per dollar of rent. It ignores expenses and financing, so it is a first-pass filter, not a full analysis.
The gross rent multiplier, or GRM, is the quickest way to size up a rental. It is the price divided by the gross annual rent, so a property costing 245,000 dollars that rents for 2,500 a month (30,000 a year) has a GRM of about 8.17. The lower the GRM, the less you pay for each dollar of yearly rent.
GRM is a screen, not an analysis. It uses gross rent and ignores vacancy, operating expenses, and financing, so two properties with the same GRM can have very different cash flow. It is closely tied to the 1 percent rule: rent at 1 percent of price a month works out to a GRM of about 8.33, so clearing the rule and a low GRM go together. What counts as a good GRM depends on the market, so compare against similar properties nearby, then run the cap rate and a full cash-flow analysis on the deals that pass.
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Related terms: Capitalization Rate (Cap Rate) , The 1% Rule , Gross Rental Income
Source: Standard real-estate appraisal practice, gross rent multiplier as a market screening ratio
Last updated . Part of the FinExplained finance glossary .