What is Gross Rent Multiplier (GRM)?

Gross Rent Multiplier (GRM) is a metric used in real estate. It is a barometer of value. It is used to compare investment opportunities. GRM accounts for the gross rents as measured against the selling price. It’s calculated by taking the price and dividing it by the total annual gross rent. For example, a price of $500,000 divided by $50,000 in gross rents produces a GRM of 10. Generally, the higher the GRM the better the building and lower the perceived risk. On the other hand, the higher the GRM the longer it will take an investor to realize their investment meaning a lower R.O.I. GRM can be useful when quickly comparing investments. It calculates the gross rent with no adjustment for vacancy. No building goes 100% occupied at all times, Secondly, it takes into account operating expenses and buildings can have different expense profiles, depending on management and building systems.