Gross Rent Multiplier (GRM)

Real Estate Investing
Updated Apr 2026 • Has calculator

The ratio of a property's purchase price to its annual gross rental income, used as a quick screening tool before deeper due diligence.

What is Gross Rent Multiplier?

The Gross Rent Multiplier (GRM) tells an investor how many years of gross rent equal the purchase price. A GRM of 10 means the property costs 10 times its annual gross rent. Lower GRMs indicate better price-to-rent ratios, though GRM ignores vacancy, operating expenses, and financing costs — making it a pre-filter rather than a final analysis tool. GRMs are most useful for comparing similar properties in the same market. Markets with GRMs under 8 often offer strong cash flow potential; gateway markets routinely see GRMs above 20.

Formula

GRM = Purchase Price / Gross Annual Rent

Worked Example

Worked example — Duplex — Phoenix, AZ

2024

Step 1  Purchase price: $500,000
Step 2  Unit 1: $2,100/mo | Unit 2: $2,050/mo → Gross annual rent: $49,800
Step 3  GRM = $500,000 / $49,800 = 10.04×
Step 4  → Comparable sales in the area show GRMs of 9–11× — fairly priced
Step 5  → At 50% expense ratio: estimated NOI ≈ $24,900; cap rate ≈ 4.98%

Source: Investopedia — Gross Rent Multiplier (2024-01-01)

Calculate Gross Rent Multiplier

Purchase price or current market value

Total scheduled annual rent (before vacancies or expenses)

Gross Rent Multiplier

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Not investment advice.

How to Interpret Gross Rent Multiplier

< 7
Very Low GRM — strong cash flow potential
7 – 12
Low-Moderate GRM — decent cash flow, worth analyzing
12 – 20
Moderate-High GRM — primary market, thinner margins
> 20
High GRM — gateway market; cap rate likely < 4%

📚 Real Estate Basics — Complete the path

  1. Cap Rate
  2. NOI
  3. Cash-on-Cash Return
  4. Gross Rent Multiplier
  5. 1% Rule
Sources
  1. Investopedia — Gross Rent Multiplier