Gross Rent Multiplier Example
Let’s say you are considering buying a single-family home as an investment. The purchase price is $650,000 and the monthly rent is $2,800/mo. What is the GRM?
First you need to annualize the rent, so take $2,800 x 12 months = $33,600
Take the purchase price $650,000 and divide it by the annual rent $33,600 = 19.34 GRM
Houses usually have higher GRMs than Duplexes, Triplexes and 4 plexes, and Apartment buildings usually have lower GRMs even still.