16.7
Higher-cost market range
0GRM 1025+
Property Price
$400,000
Annual Gross Rent
$24,000
GRM
16.7
$
$
1 for a single-family home
A GRM of 16.7 means it would take 16.7 years of gross rent to equal the purchase price. Annual gross rent of $24,000 represents 6.0% of the property price.
- What is Gross Rent Multiplier (GRM)?
- GRM is a property's purchase price divided by its annual gross rental income. It tells you how many years of gross rent it would take to cover the purchase price. A $400,000 property generating $50,000 in annual rent has a GRM of 8.
- GRM is a quick screening tool for comparing rental properties, not a full investment analysis. It does not account for operating expenses, vacancy, or financing costs.
- Is a higher or lower GRM better?
- Lower is better. A lower GRM means the property generates more income relative to its price. A GRM of 6 means the property's gross rent covers its price in 6 years, which is more attractive than a GRM of 12 where it takes twice as long.
- That said, GRM should always be compared to similar properties in the same market. A GRM of 12 might be excellent in San Francisco but poor in Memphis.
- What is a good GRM for a rental property?
- It depends entirely on the local market. In expensive gateway cities (NYC, LA, San Francisco), GRMs of 15 to 25 are common. In major metros (Chicago, Houston, Phoenix), 8 to 14 is typical. In secondary and tertiary markets, 4 to 8 is achievable.
- The most useful benchmark is the average GRM for comparable properties in the same neighborhood, not a national average.
- What is the difference between GRM and cap rate?
- GRM uses gross rent before expenses and is faster to calculate. Cap rate uses net operating income (after expenses) and is a more accurate measure of actual returns.
- Use GRM for a quick initial screen when comparing multiple properties. Use cap rate for a detailed analysis once you have a shortlist worth investigating further.
Track rental properties in your portfolio
Calm Sea tracks GRM, LTV, cashflow, and net worth across your entire portfolio in one view.