What is GRM?
Gross Rent Multiplier (GRM) is a quick screening tool that shows how many years of gross rent it would take to pay off a property. It's useful for comparing similar properties in the same market.
GRM vs. Cap Rate
| Metric | Uses | Limitation |
|---|---|---|
| GRM | Gross rent (no expenses) | Ignores operating costs |
| Cap Rate | NOI (net of expenses) | More accurate but requires more data |
Typical GRM Ranges
- 4-7x — High cash flow markets (Midwest, South)
- 8-12x — Balanced markets
- 12-20x — Appreciation markets (coastal cities)
Limitations
- Ignores operating expenses and vacancy
- Only useful for comparing similar properties
- Not suitable as standalone investment decision