What is Gross Rent Multiplier?
The Gross Rent Multiplier is a way to quickly compare and compute the value of Income producing properties in similar locations. The GRM is the sales price divided by the gross monthly rent.
For example, a duplex sells for $200,000 and receives $1,200 in gross monthly rent has a GRM of 167. It is basically how much in a particular location the market is paying for rent. While the income a property receives is the major factor in determining the value of an income property, it is not the only factor that should go into the the decision to purchase a property or to value a property. Expenses, depreciation, and negative influences all need to be taken into account. The GRM is a tool and nothing more.
If rental data is available, a short analysis rents and recent sales in an area should provide you with the areas GRM. The gross rent multiplier varies from place to place, so a GRM of 167 could be too much to pay for the income in a town in the Midwest and at the same time it can be a virtual steal in California. Know your location!
By Diane Tuman
- Flag content
Stating a discriminatory preference in an advertisement for housing is illegal. If you think this content is discriminatory or otherwise inappropriate and feel it should be removed from Zillow, please let us know by completing the information above.Close
- Content flagged
We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.
- We're Sorry
- This service is temporarily unavailable. Please come back later and try again.