Glossary term
Gross Rent Multiplier (GRM)
Gross rent multiplier is a property's price divided by its yearly gross rent. It is a fast, rough way to compare similar properties.
GRM is calculated as purchase price / annual gross rental income. A property that sells for $5,000,000 and brings in $625,000 of yearly rent has a GRM of 8.
A lower GRM means you pay less for each dollar of rent. Because it uses gross rent, GRM ignores vacancy and operating expenses, so two properties with the same GRM can have very different NOI.
Use GRM to screen deals, not to decide them. After a first pass, move to NOI, cap rate and a full set of numbers.
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