Gross Rent Multiplier (GRM)

Gross Rent Multiplier (GRM) is a quick valuation metric calculated by dividing a property's purchase price by its gross annual rental income, used as a screening tool to compare properties before deeper analysis. A property priced at $1.2 million with $120,000 in gross annual rent has a GRM of 10. Lower GRMs generally indicate better value, though the metric ignores operating expenses, vacancy, and financing costs - making it a rough filter rather than a decision tool. GRM is most useful for quickly comparing similar properties in the same market. For NNN investors, GRM has limited utility because triple net properties have minimal owner-paid expenses, making cap rate a far more accurate valuation metric. However, GRM remains popular for initial screening of small multifamily and mixed-use properties where expense ratios vary widely between comparable properties.