Gross Rent Multiplier (GRM)

The Gross Rent Multiplier (GRM) is another way to value and compare properties.  Used mostly in the apartment industry, the GRM is much like the Capitalization Rate except the gross rental income rather than the net operating income (NOI) is used to determine the value of a property.  The GRM is calculated by dividing the fair market value of the property by the gross rental income.

The Gross Rent Multiplier is also used to determine the number of years the property would take to pay for itself in gross received rent. The lower the GRM is then the better the investment is assumed to be.

EXAMPLE:

If the sales price for a property is $200,000 and the annual gross rental income for a property is $30,000, the GRM is equal to 6.67 ($200,000 ÷ $30,000).