How is the Gross Rent Multiplier (GRM) calculated?

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Multiple Choice

How is the Gross Rent Multiplier (GRM) calculated?

Gross Rent Multiplier is a quick way to compare income properties by showing how many years of gross rent it would take to equal the purchase price. The calculation uses the purchase price in the numerator and the annual gross rent in the denominator: GRM = purchase price ÷ annual gross rent. For example, a $600,000 property that would generate $75,000 in gross rent per year yields a GRM of 8 (600,000 ÷ 75,000 = 8). A lower GRM suggests quicker recovery of price through rent, but remember it’s a rough measure and doesn’t account for expenses, vacancies, financing, or taxes. The other options either use the inverse (annual gross rent ÷ price) or mix in monthly rent without forming the standard price-to-annual-rent ratio.

Gross Rent Multiplier is a quick way to compare income properties by showing how many years of gross rent it would take to equal the purchase price. The calculation uses the purchase price in the numerator and the annual gross rent in the denominator: GRM = purchase price ÷ annual gross rent. For example, a $600,000 property that would generate $75,000 in gross rent per year yields a GRM of 8 (600,000 ÷ 75,000 = 8). A lower GRM suggests quicker recovery of price through rent, but remember it’s a rough measure and doesn’t account for expenses, vacancies, financing, or taxes. The other options either use the inverse (annual gross rent ÷ price) or mix in monthly rent without forming the standard price-to-annual-rent ratio.

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