Definition
GRM is a simplified valuation metric comparing property price to gross rent before any expenses. Lower GRM indicates a cheaper property relative to its income. While less precise than cap rate or DCF analysis, GRM is useful for quick comparisons when detailed expense information is unavailable. It works best for comparing similar properties in the same market.
functions Formula
GRM = Property Price / Annual Gross Rental Income
lightbulb Example
A property priced at $600K generates $60K annual gross rent. GRM = 10. A similar property at $500K with $55K rent has GRM = 9.1—cheaper relative to income. But GRM ignores expenses, so the property with higher expenses may actually have lower NOI.
verified_user Key Points
- Quick comparison of price to rental income
- Lower GRM = cheaper relative to income
- Ignores expenses—less precise than cap rate
- Best for comparing similar properties in same market