Gross Rent Multiplier (GRM)
Real Estate / CashflowGross Rent Multiplier (GRM) is a fast, back-of-the-envelope ratio that divides a property’s purchase price by its annual gross rental income. The result tells you how many years of gross rent it would take to recover the purchase price — a lower GRM means more rent per dollar of price, which generally signals stronger cashflow potential. It is used as a first-pass screening tool, not a final underwriting metric.
How it works. A $200,000 property generating $24,000 in annual gross rent has a GRM of 8.3 ($200,000 ÷ $24,000). A $300,000 property generating the same $24,000 in rent has a GRM of 12.5. All else equal, the 8.3 GRM property delivers more rent relative to its price and is more likely to cashflow. GRMs vary widely by market: investors in Midwest markets might target GRMs below 8, while investors in high-appreciation coastal cities might accept GRMs above 15, trading cashflow for equity growth.
GRM ignores operating expenses — two properties with the same GRM can have dramatically different net income if one has high taxes, expensive insurance, or deferred maintenance. A property with a low GRM that sits in a high-tax district or needs major repairs may cashflow worse than a higher-GRM property in an efficient market. GRM is a starting point; true underwriting requires NOI, debt service, and cash-on-cash analysis.
For using GRM to screen online listings quickly, see find cashflow rentals on Zillow. For how GRMs vary by city and what to expect in your target market, see best cashflow markets.