Property Valuation
A quick valuation metric that divides a property's sale price by its gross annual or monthly rent.
The gross rent multiplier is a simple tool used to estimate the value of income-producing residential property. The formula is: GRM = Sale Price ÷ Gross Rent. To estimate value: Value = Gross Rent × GRM. Unlike the cap rate, the GRM does not account for operating expenses. It uses gross income rather than net operating income. It is useful for quick comparisons between similar properties in the same market but is less precise than a full income approach appraisal.
Exam Tip
GRM = Price ÷ Gross Rent. Value = Rent × GRM. GRM uses GROSS rent (no expenses deducted). Cap rate uses NET operating income.
Study Guide
Property Valuation
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NY Real Estate Property Valuation
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