The gross rent multiplier (GRM) divides a property’s price by its annual gross rent. It is the fastest of all real-estate screens: a GRM of 10 means the price equals ten years of gross rent, before any expenses.
Because GRM ignores vacancy, taxes, insurance and financing, it is only a first filter. RentScope pairs it with NOI, cap rate and DSCR so you can move from a quick screen to a real analysis.
Formula
GRM = Purchase price ÷ Annual gross rent
Use gross scheduled rent (before vacancy) for a conventional GRM. Some investors use effective gross income instead, which produces a slightly higher, more conservative number. A lower GRM means the property is cheaper relative to its rent.
How to calculate it
- Multiply monthly rent by 12 to get annual gross rent.
- Divide the purchase price by that annual rent.
- Compare the GRM to similar local properties — and remember it ignores expenses and financing.
Worked example
Assume a $300,000 property renting for $2,500/month with typical expenses and a 6.75% loan. Running those numbers through the RentScope engine gives:
Open the free calculator with your own numbers →
FAQ
What is a good GRM?
It varies by market and property type. Lower is generally better for the buyer, but high-appreciation markets often trade at higher GRMs. Compare against local comps, not a national number.
What is the difference between GRM and cap rate?
GRM uses gross rent and ignores operating expenses; cap rate uses NOI and therefore reflects expenses. Cap rate is the more complete measure.
Does GRM include vacancy?
A conventional GRM uses gross scheduled rent and ignores vacancy. Using effective gross income gives a more conservative version.
Is GRM the same as the 1% rule?
They are related. The 1% rule compares monthly rent to price, while GRM compares annual rent to price. A 1% ratio is roughly a GRM of 8.3.
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