Gross Rent Multiplier (GRM)
Gross Rent Multiplier (GRM) is purchase price divided by annual gross rent — a quick screening metric for comparing potential investment properties.
GRM = Purchase Price ÷ Annual Gross Rent. It tells you how many years of gross rent would equal the purchase price. A lower GRM generally indicates better value relative to income; a higher GRM indicates a premium valuation.
GRM is a blunt screening tool rather than a precise valuation metric — it ignores expenses, vacancy, and financing. Its value is speed: you can calculate it in seconds to quickly compare dozens of deals before doing deeper analysis on the promising ones.
For STR properties, typical GRM ranges are 5–10 (lower is better value). A property selling for $500,000 generating $65,000/year has a GRM of 7.7. The same property generating $100,000/year has a GRM of 5.0 — much better value relative to income.
GRM is most useful for comparing similar property types in the same market. Comparing GRMs across different markets or property types is less meaningful because expense ratios and growth prospects vary significantly.
Formula
GRM = Purchase Price ÷ Annual Gross RentCalculate It
Quick Calculator
GRM = Purchase Price ÷ Annual Gross Rent
Gross Rent Multiplier
7.7x
Worked Example
A property lists for $500,000 and generates $65,000/year in gross STR revenue. GRM = $500,000 ÷ $65,000 = 7.7x.
Related Terms
Related Calculators
Frequently Asked Questions
What is a good GRM for a short-term rental?+
For STR properties, a GRM below 8 is generally considered solid. Below 6 is excellent value. Above 10 may indicate the price is high relative to income. Always follow up GRM screening with full cap rate and DSCR analysis — GRM doesn't tell you enough on its own.
What is the difference between GRM and cap rate?+
GRM uses gross rent (before expenses); cap rate uses NOI (after expenses). GRM is a quicker but cruder metric. For the same property, a low GRM and high cap rate are both positive signals. A low GRM but also low cap rate might indicate the market has high expense ratios.
Why does GRM matter for STR investing?+
GRM allows rapid screening of deals. If you're evaluating 50 properties, GRM lets you quickly eliminate those with poor value (high GRM relative to market comps) and focus deeper analysis on the 5-10 most promising candidates.
How does GRM change with financing?+
GRM is not affected by financing — it's based purely on purchase price and gross rent. This makes it a useful financing-neutral screening tool, similar to cap rate. Your cash-on-cash return and DSCR analysis will then layer in financing specifics.
Can I use GRM to value a property?+
Yes — if you know the market GRM, you can estimate property value: Estimated Value = Annual Gross Rent × Market GRM. If similar STR properties sell at an 8x GRM and your target generates $60,000/year, implied value = $480,000. This is a rough estimate only; always verify with comparable sales data.