GRM
Gross rent multiplier
Gross rent multiplier is purchase price divided by gross annual scheduled rent. It is the fastest screen in real estate — you can compute it in your head from a listing — and it is deliberately crude, because it says nothing about taxes, insurance, vacancy or condition.
GRM = purchase price ÷ gross annual rent
Worked example
$265,000 ÷ $31,800 of scheduled rent is a GRM of 8.33.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The gross rent multiplier computes this from your own numbers and shows the arithmetic expanded. Price divided by gross annual rent — the fastest screen there is, and the one that hides the most.
Related terms
- Capitalization rateThe capitalization rate is net operating income divided by price, expressed as a percentage.
- Cash-on-cash returnCash-on-cash return is annual pre-tax cash flow divided by the total cash you actually put into the deal — down payment, closing costs and rehab.
- Internal rate of returnInternal rate of return is the annual discount rate at which the deal's cash flows — the money in at purchase, the cash flow each year and the net proceeds at sale — net out to zero.
- Equity multipleEquity multiple is total cash returned divided by total cash invested, with no adjustment for time.
- Break-even occupancyBreak-even occupancy is the occupancy at which annual pre-tax cash flow is exactly zero — the share of gross potential income the property must collect to cover operating expenses and debt service with nothing left over.
Back to the full glossary — 21 terms with formulas and worked examples.