GRM

GRM = Purchase Price / Annual Gross Rent. A property with $120,000 in annual gross rent and a $960,000 purchase price has a GRM of 8. Lower GRM indicates better value relative to rent. GRM is a fast screening tool - it does not account for vacancy, expenses, or financing. It should be used to quickly filter deals, not to make acquisition decisions. A GRM screen might eliminate properties above 12x but additional analysis is always required. GRM is most commonly used for residential income properties (1-4 units, small multifamily) and is less useful for commercial assets where NOI and cap rate are the primary valuation tools.