Gross Rent Multiplier (GRM) Calculator

How to use the GRM calculator

Enter two numbers:

• Price: the asking price or your offer.
• Gross annual rent: all rent at full occupancy for a year, before vacancy and expenses. Use current leases or market rents if units are vacant.

The calculator shows the gross rent multiplier. Add a target GRM, the multiplier similar properties have sold at nearby, and it shows the value that GRM implies for this property.

The gross rent multiplier formula

• GRM = price / gross annual rent
• Implied value = gross annual rent x target GRM
• Implied gross rent needed at a price = price / target GRM

A worked GRM example

A duplex is listed at $300,000. Each unit rents for $1,250 a month.

• Gross annual rent: $1,250 x 2 x 12 = $30,000
• GRM: $300,000 / $30,000 = 10.0

Say three similar duplexes on nearby streets sold over the past year at GRMs of about 9. The implied value of this duplex at a GRM of 9 is $30,000 x 9 = $270,000. That’s a reason to offer below asking, or to find out what makes this one worth more, such as a new roof or separate meters.

The reverse is useful too. At $300,000 and a target GRM of 9, the rents would have to total $33,333 a year, about $1,389 per unit, to justify the price.

What a good GRM result looks like

For a small landlord, GRM is a filter, not a verdict. Use it to sort a long list of listings into “worth a closer look” and “skip”. A property priced well above the GRM of recent nearby sales needs a good reason, such as below-market rents you can raise or newer systems.

Once a property passes the GRM screen, build a proper NOI with real taxes, insurance, repairs and vacancy, and check the cap rate and cash flow. Two properties with a GRM of 10 can have very different results if one has $3,000 in yearly property tax and the other has $7,000.

GRM next to cap rate

The two measures answer different questions. GRM asks how many years of gross rent the price represents. Cap rate asks what share of the price the property earns each year after operating costs. On the duplex above, $9,600 of yearly costs and 5% vacancy leave an NOI of $19,470, a 6.49% cap rate at $300,000.

Now picture a second duplex at the same price and rent, but with $4,000 more a year in property tax. Its GRM is still 10. Its NOI falls to $15,470 and its cap rate to about 5.2%. That’s the gap GRM can’t see, and why it should never be the last number you check.

Limits and caveats

• No expenses. GRM treats a property with tenant-paid utilities and one where you pay everything as the same.
• No vacancy. A building with frequent turnover looks as good as one with long-term tenants.
• Comparable sales matter. A GRM means something only next to the GRMs of similar properties in the same market and time period. Ask a local agent for recent sales with rent rolls.
• Rents must be real. If a listing uses projected rents, recalculate with current leases.