Investment Math
Gross Rent Multiplier (GRM): Real Estate Exam Math
Gross Rent Multiplier (GRM) is a quick-and-dirty way to compare income properties. GRM = Property Value ÷ Annual Gross Rent. Lower GRM means a faster 'payback' relative to rent. Unlike cap rate, GRM ignores expenses — so it's a rough screen, not a precise valuation.
The Formula
GRM = Property Value ÷ Annual Gross Rent. Or: Property Value = Annual Gross Rent × GRM.
Some markets use Monthly GRM = Value ÷ Monthly Gross Rent. Always check whether the question is asking annual or monthly.
Three Worked Examples
Question 1
Property value: $300,000. Annual gross rent: $30,000. What's the GRM?
GRM = $300,000 ÷ $30,000 = 10.
Question 2
Comparable properties in the market trade at GRM 8. A property has annual gross rent of $48,000. What's an estimated value?
Value = $48,000 × 8 = $384,000.
Question 3
Property value: $1,200,000. Monthly gross rent: $10,000. What's the monthly GRM?
Monthly GRM = $1,200,000 ÷ $10,000 = 120.
GRM vs. Cap Rate
GRM uses GROSS rent (no expense deduction); cap rate uses NET operating income (after expenses)
GRM is faster to calculate and compare across properties
Cap rate is more accurate but requires accurate expense data
GRM is best for first-pass screening; cap rate is better for serious analysis
A property with high expenses can have a deceptively favorable GRM
Practice GRM Problems
Drill GRM and cap rate problems together.
Related Investment Math
GRM FAQ
Is lower GRM better?
Generally yes — lower GRM means a property generates more rent relative to its value. But low GRM can also reflect low quality or high expenses.
When should I use GRM instead of cap rate?
GRM works for quick comparisons across similar properties when expense data isn't available. Use cap rate for any serious valuation.
Is GRM the same as a price-to-rent ratio?
Conceptually yes — both compare price to rent. GRM uses annual rent in the U.S.; price-to-rent ratios sometimes use monthly rent.