Gross Rent Multiplier, commonly abbreviated GRM, is calculated by dividing a property's purchase price by its gross annual rental income. The result is a simple multiple that investors use to compare properties quickly or screen a large set of potential acquisitions before digging into a full underwriting model. A lower GRM generally suggests a property is priced more cheaply relative to the income it generates, while a higher GRM implies the opposite.
GRM is useful as a first-pass filter, but it has real limitations. It ignores operating expenses entirely, so two properties with identical gross income and price can have very different net cash flow depending on taxes, insurance, maintenance, and vacancy. Because of this, GRM is best treated as a screening tool rather than a substitute for metrics like capitalization rate or net operating income, which account for the costs of actually running the property.
Further reading: How Mark-to-Market Strategies Influence Tenant Retention
ACCESS
