Gross rent multiplier calculator
Gross rent multiplier is the price divided by a year of rent. It takes ten seconds and lets you rank a list of properties before spending time on detailed numbers.
Gross rent multiplier
10.4
The price equals about 10.4 years of gross rent.
- Purchase price
- $300,000
- Gross yearly rent
- $28,800
- Gross yield (rent ÷ price)
- 9.60%
How it is calculated
GRM = Purchase price ÷ Gross annual rent
- Purchase price
- The asking price or agreed price of the property.
- Gross annual rent
- Twelve months of rent at full occupancy, before vacancy or any expenses.
Worked example
- A duplex is listed at $300,000 and both units together rent for $2,400 a month, which is $28,800 a year.
- $300,000 ÷ $28,800 = 10.4. The price is about ten and a half years of gross rent.
How to use GRM
A lower multiplier means you pay less for each dollar of rent. Comparing the GRM of several listings in the same neighborhood quickly shows which are priced high or low against the income they produce.
GRM ignores expenses, so it cannot tell you whether a property is profitable. Two buildings with the same multiplier can have very different taxes, insurance and repair needs. Use it to shortlist, then run cap rate and cash flow on the ones that pass.
Typical multipliers vary widely by city. Compare against recent sales of similar rentals in the same area instead of a national rule of thumb.
Common questions
Is a lower GRM better?
Generally yes, since a lower number means the price is smaller relative to the rent. A very low GRM can also point to a weak location or a building that needs work, so check the reason.
What is the difference between GRM and cap rate?
GRM uses gross rent and ignores expenses. Cap rate uses net operating income, which is rent after vacancy and expenses. Cap rate is more accurate, and GRM is faster.
Can I use monthly rent instead of annual rent?
Some investors do, which gives a number twelve times larger. This calculator uses annual rent, the more common convention. Make sure you compare figures calculated the same way.
How do I estimate a property’s value with GRM?
Multiply the property’s gross annual rent by the GRM of comparable properties that sold recently. Rent of $30,000 a year in an area where similar rentals sell at a GRM of 10 suggests a value near $300,000.