GRM

Gross rent multiplier, or GRM, expresses the relationship between a property's sale price and its gross rental income. Dividing the sale price by the property's gross rent produces the multiplier. Applying a market-derived GRM to a subject property's gross rent then produces a value indication.

GRM can support the income approach for smaller residential rental properties, particularly two- to four-unit buildings where a full income capitalization analysis may be less practical. Appraisers derive a GRM from comparable rental properties that have recently sold, using a consistent rent period such as monthly or annual gross rent.

GRM is a simplified measure because it uses gross rather than net income. It does not account for vacancy, operating expenses, taxes, insurance or differences in expense structures. As a result, two properties with similar rents can produce similar GRM indications despite having different operating costs. Appraisers typically use GRM as supporting evidence and reconcile it with other valuation methods.