Gross Rent Multiplier (GRM) Calculator
Instantly compute GRM, implied property value, or required rent for a target GRM. Great for quickly screening rental and multifamily deals.
GRM Calculator
Compare up to 4 properties by GRM
| Property | Price | Annual Rent | GRM | Best? |
|---|
Tip: Lower GRM usually indicates more income per dollar of price, assuming similar expenses and risk.
What is Gross Rent Multiplier (GRM)?
Gross Rent Multiplier (GRM) is a quick rule-of-thumb metric used by real estate investors, brokers, and appraisers to compare income-producing properties. It relates a property’s price to its gross rental income, ignoring expenses.
GRM formula
\(\text{GRM} = \dfrac{\text{Property Price}}{\text{Annual Gross Rent}}\)
For example, if a duplex costs $300,000 and generates $30,000 per year in gross rent, the GRM is:
\(\text{GRM} = \dfrac{300{,}000}{30{,}000} = 10\)
Rearranging the GRM formula
You can rearrange the GRM formula to solve for price or rent instead:
Price from GRM and rent
\(\text{Price} = \text{GRM} \times \text{Annual Gross Rent}\)
Required rent for a target GRM
\(\text{Annual Gross Rent} = \dfrac{\text{Price}}{\text{GRM}}\)
The calculator above lets you use all three versions: calculate GRM, estimate a fair price from a market GRM, or find the rent needed to hit your target GRM.
Example: Using GRM to screen two deals
Suppose you are comparing two small apartment buildings:
- Property A: Price = $500,000, Annual gross rent = $60,000
- Property B: Price = $650,000, Annual gross rent = $78,000
Compute GRM for each:
GRMA = 500,000 ÷ 60,000 ≈ 8.33
GRMB = 650,000 ÷ 78,000 ≈ 8.33
Both properties have the same GRM, so they offer a similar gross income-to-price ratio. To decide between them, you would then look at expenses, vacancy, location, and risk.
GRM vs. Cap Rate
GRM is often confused with cap rate, but they are different:
- GRM: uses gross rent (before expenses).
- Cap rate: uses net operating income (NOI) after operating expenses.
Cap rate formula
\(\text{Cap Rate} = \dfrac{\text{NOI}}{\text{Price}}\)
Because GRM ignores expenses, it is best used as a fast screening tool or for comparing similar properties in the same market. For serious investment decisions, always follow up with a full cash-flow and cap rate analysis.
What is a “good” GRM?
There is no universal “good” GRM. Typical ranges vary widely by city, property type, and interest-rate environment. Some general observations:
- Lower GRM → more rent per dollar of price (potentially better value).
- Higher GRM → less rent per dollar of price (often in prime or low-risk locations).
- Older or higher-maintenance properties may have low GRM but high expenses.
The most useful way to use GRM is to compare a property’s GRM to recent sales of similar properties in the same submarket.
Limitations of GRM
- Ignores operating expenses, capital expenditures, and financing.
- Does not account for vacancy or rent collection risk.
- Can be misleading when comparing very different property types or markets.
Use GRM as a first-pass filter: quickly screen many deals, then analyze the most promising ones with detailed underwriting.
Frequently asked questions about GRM
Is GRM better than cap rate?
Neither is “better” in all cases. GRM is simpler and faster, but cap rate is more informative because it uses net operating income. Many investors use GRM for quick comparisons and cap rate for deeper analysis.
Should I use monthly or annual rent?
GRM is conventionally based on annual rent. If you only know monthly rent, multiply by 12. The calculator lets you input either monthly or annual rent and converts it automatically.
Can I use GRM for short-term rentals (Airbnb, vacation rentals)?
You can, but be careful. Short-term rental income is more volatile and seasonal. Use realistic, conservative annualized gross income and always stress-test your assumptions.