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Gross Rent Multiplier (GRM)
Interpretation
Calculation Principles & Formulas
The Gross Rent Multiplier (GRM) is a metric used to quickly assess the value of a real estate investment. It represents the number of years the property would take to pay for itself in gross received rent (ignoring operating expenses).
[Formula]
GRM = Property Price / Gross Annual Rent
Example:
If a property costs $500,000 and the gross annual rent is $50,000, then:
GRM = 500,000 / 50,000 = 10
Note: A lower GRM generally indicates a better potential return on investment. Typically, a GRM between 8 and 12 is considered reasonable, though this varies by location and market. GRM does not account for maintenance, taxes, or vacancy rates and should be used for initial screening only.
