What Is the Gross Rent Multiplier?

The Gross Rent Multiplier (GRM) is a quick valuation metric that compares a property’s price to its gross annual rental income. GRM = Purchase Price / Annual Gross Rent. It functions like a stock’s P/E ratio — a lower GRM means you’re paying less per dollar of rental income, while a higher GRM implies a premium price relative to income. GRM is one of several screening tools used in real estate investment analysis — it lets investors compare multiple properties before committing to detailed analysis.

GRM Benchmarks by Market and Property Class

GRM varies significantly by location, property type, and market conditions. General benchmarks for residential investment properties:

• Urban / Class A (gateway cities): 12-20 — premium locations with strong appreciation but lower cash flow yield
• Suburban / Class B: 8-12 — balanced markets with moderate cash flow and appreciation
• Rural / Class C: 4-8 — higher yield but potentially higher risk, deferred maintenance, and limited appreciation
• Multifamily (5+ units): 6-10 — institutional-grade assets priced on income, not comparable sales

These benchmarks shift with interest rate cycles. At low rates (2020-2022), GRM expanded as investors accepted lower yields; at current rates (6.5-7%+), GRM compression brings prices closer to historical income norms (source: J.P. Morgan Real Estate Review, Corporate Finance Institute).

GRM vs Cap Rate vs Rent-to-Price Ratio

All three metrics relate price to rental income, but they serve different purposes:

Metric	Formula	Includes Expenses?	Best For
GRM	Price / Annual Gross Rent	No	Quick property ranking
Cap Rate	NOI / Price	Yes (operating expenses)	Investment return analysis
Rent-to-Price	Monthly Rent / Total Investment	No	Pass/fail screening (1% rule)

GRM and rent-to-price are mathematically related (GRM = 1 / (12 × rent-to-price ratio)). A 1% rent-to-price corresponds to GRM ≈ 8.3. For expense-adjusted analysis, the cap rate calculator gives a more complete picture of actual investment returns.

How to Use This Calculator

1. Property Purchase Price — Enter the asking or negotiated price. For comparative analysis, run multiple properties through the calculator to rank by GRM.
2. Monthly Rental Income — Enter the gross monthly rent from all units at full occupancy. Use market rents (not in-place rents) for fair comparison between properties.
3. Other Monthly Income — Include non-rent income: laundry, parking, storage, vending, pet fees. Set to $0 if none. This income counts toward total gross income in the GRM calculation.
4. Closing Costs (%) — Enter as a percentage of purchase price (typically 2-5%). This affects the total acquisition cost metric but not the core GRM ratio.
5. Annual Operating Expenses — Include taxes, insurance, maintenance, and management fees. While GRM itself ignores expenses, the calculator also shows NOI and expense ratio for deeper analysis.
6. Vacancy Rate — Expected vacancy percentage for effective gross income calculation. GRM uses gross rent (before vacancy), but the NOI calculation applies vacancy reduction.

The calculator shows your GRM, price-to-monthly-rent ratio, NOI, effective gross income, and operating expense ratio. Use GRM to rank competing properties quickly — lower GRM generally indicates better value relative to rental income. Then run the top candidates through our cap rate or cash-on-cash return calculators for full analysis.