Gross Rent Multiplier: The Fastest Way to Screen a Deal

The Gross Rent Multiplier (GRM) is the simplest metric in rental property investing. It tells you how many years of gross rent it would take to pay off the purchase price — and it takes about 10 seconds to calculate.

The Formula

GRM = Purchase Price / Annual Gross Rent

A property listed at $300,000 with $2,000/month in rent has a GRM of 12.5 ($300,000 / $24,000).

What's a Good GRM?

GRM benchmarks vary by market, but as a general guide:

• Below 8 — Strong cash flow market. High yields, often lower appreciation.
• 8–12 — Middle ground. Most secondary markets land here.
• 12–16 — Lower yield. Coastal and high-appreciation markets.
• Above 16 — Cash flow will be thin or negative. Price appreciation is the play.

GRM vs. Cap Rate: What's the Difference?

Both metrics let you compare properties quickly, but they measure different things:

GRM is faster — you only need the purchase price and rent. Cap rate is more accurate because it accounts for operating expenses. Use GRM to quickly screen deals, then run cap rate on the ones that pass.

When to Use GRM

GRM works best as a first-pass filter:

1. 1.Screening off-market leads — If someone sends you a deal and the GRM is 18, move on before wasting time on deeper analysis.
2. 2.Comparing similar properties — Two fourplexes in the same neighborhood? Lower GRM = better value, all else equal.
3. 3.Setting a maximum price — Know your target GRM? Work backwards to find your maximum offer price.

The Limitation

GRM ignores everything below the gross rent line: vacancy, operating expenses, taxes, insurance. A property with a low GRM but high expenses can still be a bad deal. Always run the full analysis before making an offer.

Use Caprium to calculate GRM alongside cap rate, CoC return, and DSCR — all from a single property address.