GRM (Gross Rent Multiplier)
En español: Multiplicador de renta bruta (GRM)
The gross rent multiplier is the price divided by the property's annual gross rent. It answers one question quickly: how many years of rent, before any expense, does this price represent. It is the oldest shorthand in small income real estate, and it is still the first number many sellers quote.
GRM=PriceGross annual rent
- Price
- The purchase price or asking price being tested.
- Gross annual rent
- Scheduled rent for twelve months before vacancy and before any operating expense.
- It is a screening tool. Useful for sorting twenty listings in an hour, never for deciding which one to buy.
- It rewards buildings with high rents and terrible expenses, because expenses are not in the equation at all.
- Ask which rent was used. Scheduled, in-place and market rents produce three different multipliers for one building.
- When a seller leads with the GRM, it is usually because the cap rate does not look as good.
The same eight units, asking $2.0M, against the value the income supports at a 6.0% cap.
Three years of rent separate the two numbers, and no expense line was ever discussed. That is the whole case against using it alone.
Related terms
All termsCap Rate (Capitalization Rate)
The capitalization rate is a building's net operating income divided by its price, expressed as a percentage.
InvestmentPrice Per Unit
Price per unit is the total price divided by the number of dwelling units.
InvestmentNOI (Net Operating Income)
Net operating income is what a property earns from operations in a year: all collected income minus operating expenses, before any mortgage payment, income tax, or capital projects.
Terms arrive with the writing.
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