Gross Rent Multiplier

Posted by Red Sky Realty Group on Tuesday, March 24th, 2009 at 8:36pm.

Last time in our series on beach house economics, we looked at capitilazition rate.  Today we will take a look at Gross Rent Multiplier or GRM.  GRM is another way to compare similar income producing properties.  GRM like Cap rate is a simple way to start property comparisons.  To compare properties by GMR, you need two pieces of information: sales price and gross monthly rent.

Calculating the GRM:

To calculate the GRM, you need to take the sales price and divide it by the gross monthly rent.

Sales Price: $100,000


Gross Monthly Rent: $1,250

Gross Rent Multiplier or GRM: 80

While it does have many limitations, including not taking into account vacancy and differences in operating expenses, GRM is a way investors can quickly eliminate prospective properties.  By no means is using GRM the only factor in choosing a home, but you can definitely use GRM to narrow down your field.