A quick rental screen: gross rent multiplier and value from market GRM.
Screen rental listings fast with the gross rent multiplier (GRM). Enter the price and the monthly rent to get the GRM, or enter the GRM of similar rentals to estimate what a property is worth.
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The gross rent multiplier formula
GRM = property price ÷ yearly gross rent
Yearly gross rent is the total rent from all units before any expenses. The GRM tells you how many years of rent it takes to equal the price. Run it backwards to estimate value: value = GRM × yearly gross rent.
Worked example
The calculator opens with a $300,000 property that rents for $2,500 a month, or $30,000 a year.
GRM: $300,000 ÷ $30,000 = 10. If similar rentals in the area sell at a GRM of 10, the property is priced in line with the market at $300,000. If they sell at a GRM of 9, the same rent suggests a value of about $270,000.
What is a good GRM?
Lower is better for the buyer, because you pay less for each dollar of rent. A "good" GRM only means something compared with similar properties in the same area. Many investors look at the range of roughly 4 to 12, but expensive coastal markets often run much higher, and older properties in smaller markets lower.
GRM vs. cap rate
The GRM ignores vacancy and expenses, so two properties with the same GRM can earn very different incomes if one has much higher taxes or repairs. Use the GRM to sort listings quickly, then run the real numbers with the cap rate calculator or the rental property calculator on the ones that pass.
Learn more in gross rent multiplier: how to calculate and use it.
Frequently asked questions
Should I use monthly or yearly rent?
Most investors use yearly gross rent, which gives GRMs in the single or low double digits. Some use monthly rent, which gives numbers 12 times larger. Always compare GRMs calculated the same way. This calculator takes the monthly rent and converts it to yearly.
Is the GRM the same as the 1% rule?
They are related. The 1% rule says monthly rent should be at least 1% of the price, which is the same as a GRM of about 8.3 or lower.