Gross rent multiplier (GRM)
National Real Estate Exam glossary · Math Calculations
Definition
A quick valuation factor relating a property's price to its rent: GRM = Price div Monthly Rent, so Value = GRM × Monthly Rent. A gross income multiplier (GIM) uses annual income instead. The GRM is a screening shortcut, less rigorous than a full income-approach capitalization.
Gross rent multiplier (GRM) in plain English
The gross rent multiplier is a fast, back-of-the-napkin way to guess what an income property is worth by comparing its price to the rent it brings in. You calculate GRM = Price div Monthly Rent, and then you can flip it around to estimate value: Value = GRM × Monthly Rent. For example, if similar buildings sell for a GRM of 12 and a place rents for $2,000 a month, a quick estimate is 12 × $2,000 = $24,000 × 12 = $288,000. It's a rough screening tool — like judging a used car by its mileage alone — handy for quickly comparing properties, but not as careful as a full analysis of actual profits (a version called GIM just uses yearly income instead of monthly rent).
Also called: GRM
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