GRM Calculator
Calculate Gross Rent Multiplier for quick rental property screening. Includes 1% rule analysis and market comparison benchmarks.
Property Details
GRM Analysis
Average GRM. Typical for balanced markets.
GRM Formula
A GRM of 10.4 means it would take 10.4 years of gross rent to equal the purchase price. Lower GRM = better cash flow potential.
GRM Benchmarks by Market
GRM varies significantly by location. Cash flow markets have lower GRMs while appreciation markets have higher GRMs.
1% Rule Analysis
GRM Limitations
- •GRM uses gross rent and ignores operating expenses.
- •Two properties with the same GRM may have very different NOI and cash flow.
- •Use GRM for quick screening, then analyze with Cap Rate and Cash-on-Cash for accuracy.
- •GRM is most useful when comparing similar properties in the same market.
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Understanding Gross Rent Multiplier
The Gross Rent Multiplier is a simple metric for quickly evaluating and comparing rental properties. It's not as accurate as cap rate, but it's faster when you don't have expense details.
GRM Formula
GRM = Property Price ÷ Gross Annual Rent
Or equivalently: GRM = Property Price ÷ (Monthly Rent × 12)
The 1% Rule Connection
The 1% rule (monthly rent = 1% of price) translates to a GRM of 8.33. Properties with lower GRMs exceed the 1% rule and typically have strong cash flow.
GRM Limitations
- Ignores operating expenses (taxes, insurance, maintenance)
- Properties with same GRM can have very different actual returns
- Best used for comparing similar properties in same market
- Should be followed up with detailed cap rate analysis
Frequently Asked Questions
What is Gross Rent Multiplier (GRM)?▼
GRM is a quick way to evaluate rental properties by dividing the property price by annual gross rent. A GRM of 10 means it takes 10 years of gross rent to equal the purchase price. Lower GRM = better cash flow potential.
What is a good GRM for rental property?▼
GRM varies by market. Cash flow markets often have GRMs of 6-10. Balanced markets are 10-12. Appreciation markets can be 15-20+. Compare GRM to similar properties in the same area for context.
How is GRM different from cap rate?▼
GRM uses gross rent (before expenses), while cap rate uses NOI (after expenses). GRM is quicker to calculate but less accurate. Cap rate gives a true picture of returns after operating costs.
What is the 1% rule?▼
The 1% rule states that monthly rent should be at least 1% of the purchase price (equivalent to GRM of 8.33). It's a quick screening tool - properties meeting this rule often have good cash flow potential.
When should I use GRM vs cap rate?▼
Use GRM for quick initial screening when you don't have expense details. Use cap rate for serious analysis. GRM is best for comparing similar properties in the same market where expense ratios are comparable.