The gross rent multiplier is a property’s price divided by its gross annual rental income. A $5,000,000 building with $625,000 of gross rent has an 8.0 GRM. It is a quick, rough screen — it ignores expenses, so it is no substitute for a cap rate.
GRM is useful for a fast first look or to compare similar buildings, but because it uses gross rent rather than net operating income, it says nothing about how efficiently a property is run. Investors confirm a deal with the cap rate and full underwriting.
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