How is the Gross Rent Multiplier Calculated?
Calculating the gross rent multiplier for a parcel of real estate is simple: market value divided by gross annual rent income. For example, if you have a million-dollar condo building that makes $150,000 a year, the GRM is 6 2/3. You should raise an eyebrow at any GRM above 12 or below 4.
Estimating Market Value
Usually, you'll be solving for fair market price. Multiply an average GRM for your target market by the amount of money you expect to earn in rent on a specific property, and you should get that property's estimated market value.
Comparing With Other Metrics
GRM is not the whole story. In fact, it's generally less reliable than capitalization rate — another popular investment property…