The GRM formula
GRM = Purchase price ÷ Annual gross rent
A lower GRM means you're paying less for each dollar of rent. Because it uses gross rent, it ignores expenses entirely, so it's best for comparing similar properties in the same area.
Example
A triplex is listed at $400,000 and brings in $3,500 a month, or $42,000 a year. Its GRM is 9.52. If similar buildings nearby trade at a GRM of 10, the rent supports a value of about $420,000, so the listing is priced about $20,000 below the market multiple.
Where to find the market GRM
Divide the sale price of recently sold rentals by their annual rent. A local agent or property manager can pull those numbers. Three to five comparable sales give you a usable range.
Common questions
Is GRM better than cap rate?
No, it's faster but rougher. Cap rate accounts for expenses; GRM doesn't. Use GRM to sort listings, then check cap rate on the good ones.
What's a good GRM?
There's no universal number. In many markets 8–12 is typical; what matters is how the property compares to its neighbors.