Definition: A GRM relates a property’s price to its gross rental income. GRM = sale price ÷ gross rent. An appropriate multiplier from comparable properties can be applied to a subject property’s gross rent to indicate value.
Example
A comparable property sells for $240,000 and rents for $2,000 per month. Its monthly GRM is 120. At that multiplier, $2,200 monthly rent indicates $264,000.
Keep the distinction clear
Match the rental period: a monthly multiplier must be used with monthly rent. GRM does not deduct operating expenses and is not a capitalization rate.
Related terms
Income Approach · Capitalization Rate (Cap Rate) · Net Operating Income (NOI)
Keep studying
Income Approach: NOI, Cap Rate, Property Value, and Cash-on-Cash Return
References: Fannie Mae and Freddie Mac: Appraisal example, income approach
Pronunciation (US): GROHS RENT MUL-tuh-ply-er; GRM: jee-ar-EM (capitals show stress)
Pronunciation reference: Merriam-Webster
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