Instantly calculate your Gross Rent Multiplier to evaluate rental property investments.
Gross Rent Multiplier (GRM) is a valuation metric used in real estate investing to compare different rental properties. It is calculated by dividing the property value by the gross annual rental income. This simple metric helps investors evaluate the profitability and potential return on investment of rental properties.
To calculate the Gross Rent Multiplier, use the following formula:
GRM = Property Value / Gross Rental Income
This calculation helps investors determine how many years it will take to pay off the property based on rental income alone. The lower the GRM, the more favorable the investment, as it indicates a shorter payback period.
Suppose you are considering a rental property with a value of $500,000 and an annual gross rental income of $60,000.
GRM = $500,000 / $60,000 = 8.33
This means it will take approximately 8.33 years for the rental income to cover the cost of the property.