Definition
Gross rent multiplier is purchase price divided by annual gross rent. A GRM of 8.3 means the property costs 8.3 years of gross rent. Lower is better.
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GRM is a quick valuation tool that helps investors rapidly assess whether a property is fairly priced relative to its rental income. Lower GRM values (5-8) generally indicate better value, though this varies by market. GRM doesn't account for expenses, so it's best used for quick comparisons rather than detailed analysis.
Pro Tip
Use GRM for initial screening, then follow with detailed analysis.
Example
A property purchased for $300,000 with $3,000 monthly rent has a GRM of 8.3 ($300,000 ÷ $36,000)