What is gross rent multiplier (GRM)?+
GRM is a quick valuation ratio: property price divided by gross annual rental income. A property priced at $500,000 with $50,000 annual gross rent has a GRM of 10. The lower the GRM, the faster the property would pay for itself through gross rent — though gross doesn't account for expenses.
What's a 'good' GRM?+
Highly market-dependent. In growth secondary markets (Phoenix, Austin), GRMs of 12-16 are typical for stabilized multifamily. In Midwest cash-flow markets (Indianapolis, Memphis), 7-10 GRMs are common. In coastal trophy markets (SF, NYC), GRMs of 18-25+ are normal — buyers are pricing for appreciation, not yield.
Is GRM better than cap rate?+
No — cap rate is more accurate because it factors in expenses (uses NOI, not gross rent). GRM is a fast screen for comparison shopping when you don't have NOI yet. Use GRM to filter listings, cap rate to underwrite the deal seriously.
How do I use GRM in deal screening?+
Get the typical GRM for your market and asset class (from comp sales). Then for any listing, calculate GRM = price ÷ gross annual rent. If a property is at 10 GRM in a market where comps trade at 8, the property is priced 25% high relative to gross rent. Worth a closer look at why.
Does GRM include expenses?+
No — that's the whole point of "gross." GRM uses gross rental income, not net. Two properties with the same GRM can have wildly different cash flow profiles depending on their expense ratios. Always follow up GRM with a real NOI underwrite.
What's the relationship between GRM and cap rate?+
Loose inverse. Lower GRM tends to mean higher cap rate (better cash flow), higher GRM tends to mean lower cap rate (more appreciation-focused). But the relationship varies with expense ratios — high-tax jurisdictions can have low GRMs AND low cap rates because expenses eat the gross yield.
Monthly GRM vs annual GRM?+
Some operators use monthly gross rent (GRM = price ÷ monthly rent), which produces numbers in the 80-200 range. Most professional use is annual (GRM = price ÷ annual rent), producing 5-25. Always confirm which version you're looking at before comparing.
When does GRM mislead?+
Three cases: (1) Properties with high other-income components (laundry, parking, fees) — GRM ignores these; (2) Properties with below-market rents — gross income understates true potential; (3) Properties with hidden expenses (large capex backlog, tax appeal pending) — GRM doesn't surface the expense story.