Gross Rent Multiplier Calculator Formula

Understand the math behind the gross rent multiplier calculator. Each variable explained with a worked example.

Use the Gross Rent Multiplier Calculator

Formulas Used

Gross Rent Multiplier

grm = annual_rent > 0 ? purchase_price / annual_rent : 0

Annual Gross Rent

annual_gross_rent = annual_rent

Implied Price at GRM 10

implied_price_at_grm_10 = annual_rent * 10

Variables

VariableDescriptionDefault
purchase_pricePurchase Price(USD)400000
monthly_rentMonthly Gross Rent(USD)3200
annual_rentDerived value= monthly_rent * 12calculated

How It Works

How the Gross Rent Multiplier Works

The GRM is a screening tool that compares a property's price to its gross rental income without factoring expenses.

Formula

GRM = Purchase Price / Annual Gross Rental Income

Usage

  • Lower GRM values suggest a property may generate better returns relative to its price
  • GRM does not account for operating expenses, vacancies, or financing
  • Best used for quick side-by-side comparison of similar properties in the same market

    • Worked Example

    A property is listed at $400,000 and rents for $3,200 per month.

    purchase_price = 400000monthly_rent = 3200
    1. 01Calculate annual gross rent: $3,200 x 12 = $38,400
    2. 02GRM = $400,000 / $38,400 = 10.42
    3. 03A GRM of 10.42 means it takes about 10.4 years of gross rent to equal the purchase price
    4. 04At a GRM of 10, the implied price would be $38,400 x 10 = $384,000

    Ready to run the numbers?

    Open Gross Rent Multiplier Calculator