The gross rent multiplier (GRM) is a property’s price divided by its gross rent, and it tells you how many months (or years) of rent it takes to equal the price. If a rental house is worth $180,000 and rents for $1,500 a month, its monthly GRM is 120 and its annual GRM is 10. That is the whole formula. What matters for investors and wholesalers is how you get a market GRM from real comps, which version (monthly or annual) you are looking at, and what the number cannot tell you.
The Gross Rent Multiplier Formula
The formula is price (or value) divided by gross rent. “Gross” means total scheduled rent before any expenses: no taxes, insurance, vacancy, repairs or management are subtracted. You can run it in two directions:
- GRM = Price ÷ Gross rent (to measure a deal)
- Value = Gross rent × GRM (to estimate a price once you know the market’s GRM)
Monthly GRM vs annual GRM: the 12x trap
Most investor blogs use annual rent, which produces numbers like 8, 10 or 12. Residential appraisers usually work in monthly rent. On Fannie Mae’s Uniform Residential Appraisal Report (Form 1004), the income approach line reads “Estimated Monthly Market Rent $ X Gross Rent Multiplier = $ Indicated Value by Income Approach.” The Small Residential Income Property Appraisal Report (Form 1025) for 2–4 units uses “Total gross monthly rent $ X gross rent multiplier (GRM).” So an appraiser’s GRM of 120 and an investor’s GRM of 10 can describe the exact same house.
Monthly GRM ÷ 12 = annual GRM. If a buyer tells you their max is “a GRM of 10” and you apply 10 to monthly rent, you will price a $1,500-a-month house at $15,000. Always say the unit out loud: “monthly GRM 120” or “annual GRM 10.”
Hypothetical example: A three-bedroom house is under contract at $180,000 and leased at $1,500 a month. Monthly GRM = 180,000 ÷ 1,500 = 120. Annual GRM = 180,000 ÷ 18,000 = 10.0. Neither number means anything until you compare it to local comps.
How to Derive a Market Gross Rent Multiplier From Comps
A GRM is only useful as a comparison to what similar rentals actually sold for. Fannie Mae’s Selling Guide says the income approach rests on the premise that market value is related to the rent a property can earn, and it requires appraisals using that approach to include “the supporting comparable rental and sales data” and “the calculations used to determine the gross rent multiplier” (B4-1.3-10). You can follow the same logic with a simple process:
- Pull recent sales of properties that were rented at the time of sale, or that sold and were then leased soon after, in the same submarket. Same unit count, similar bed/bath, similar age and condition.
- Confirm the rent for each comp. Use the actual lease, the listing’s rent roll, or a property manager. Asking rents on rental sites are a starting point, not proof.
- Divide each sale price by its monthly rent. Keep everything monthly so you can compare to appraisals.
- Look at the range and the middle. Throw out an obvious outlier (a family sale, a below-market lease to a long-term tenant) rather than letting it pull the average.
- Pick a GRM from the tight part of the range and note why. Then apply it to the subject’s market rent, not just its current rent.
Hypothetical example: five rented three-bed, one-bath houses that sold in the last six months in the same zip code.
| Comp | Sale price | Monthly rent | Monthly GRM | Annual GRM |
|---|---|---|---|---|
| A | $168,000 | $1,400 | 120.0 | 10.00 |
| B | $182,000 | $1,450 | 125.5 | 10.46 |
| C | $175,000 | $1,500 | 116.7 | 9.72 |
| D | $190,000 | $1,550 | 122.6 | 10.22 |
| E | $160,000 | $1,350 | 118.5 | 9.88 |
| Median | 120.0 | 10.00 |
The range is 116.7 to 125.5, the median 120.0 and the average about 120.7. Five clean comps clustered that tightly make a monthly GRM of 120 defensible here.
Valuing the subject property
Your subject is a similar house with a supported market rent of $1,475 a month. Value indication = $1,475 × 120 = $177,000. Bracketing with the low and high comps gives $172,083 (at 116.7) to $185,138 (at 125.5). That bracket is useful: it shows a buyer you did not cherry-pick the top number.
To support that $1,475 rent, do what an appraiser would do on Fannie Mae’s Single-Family Comparable Rent Schedule (Form 1007): compare leased rentals, adjust only for significant differences from the subject, and note the range of rents, vacancy and rent trends. Treat the result as one value indication to set beside your sales comps and ARV analysis, not as a replacement for them. GRM is also a fast first screen when a provider pitches you a ready-to-rent turnkey house, before you rebuild its full expense projection.
Reverse-solving a maximum price
Flip the formula and GRM becomes a price ceiling. If a landlord buyer tells you they will not pay more than a monthly GRM of 100 all-in in this zip code, the ceiling on a $1,475 rental is $1,475 × 100 = $147,500, including repairs. Notice that a monthly GRM of 100 is the same thing as the 1% rule: rent equal to 1% of price. Many buyers who quote the 1% rule are really quoting a GRM.
GRM vs Cap Rate vs the 1% Rule vs DSCR
Each metric answers a different question. GRM and the 1% rule are fast screens that use only price and rent. Cap rate adds operating expenses. DSCR adds the loan.
| Metric | Formula | Uses expenses? | Uses financing? | Best for |
|---|---|---|---|---|
| GRM | Price ÷ gross rent | No | No | Comparing similar rentals in one submarket fast |
| 1% rule | Monthly rent ÷ price ≥ 1% | No | No | Pass/fail screen (monthly GRM of 100 or less) |
| Cap rate | NOI ÷ price | Yes | No | Comparing income after operating costs |
| DSCR | Rent (or NOI) ÷ debt payment | Taxes, insurance, HOA via PITIA | Yes | Whether the property qualifies for and carries a loan |
For a DSCR loan on a single-family rental, lenders commonly compare monthly rent with the full payment (principal, interest, taxes, insurance and any association dues). Each lender sets its own minimum ratio, so ask your buyer’s lender rather than assuming one.
Same GRM, very different properties
GRM ignores every cost of owning the property. Here is why that matters. Hypothetical example: two houses, both priced at $150,000 and both renting for $1,250 a month. Both have a monthly GRM of 120 (annual 10.0). Both fail the 1% rule at 0.83%.
| Annual figures | House A | House B |
|---|---|---|
| Gross scheduled rent | $15,000 | $15,000 |
| Vacancy allowance | 5% ($750) | 8% ($1,200) |
| Property taxes | $1,800 | $3,900 |
| Insurance | $1,400 | $3,000 |
| Maintenance reserve | 8% of rent ($1,200) | 10% of rent ($1,500) |
| Management (8% of collected rent) | $1,140 | $1,104 |
| NOI | $8,710 | $4,296 |
| Cap rate | 5.8% | 2.9% |
| DSCR (75% loan, assumed 7.5%, 30 years) | 1.19 | 0.92 |
Identical GRM, but House B earns roughly half the NOI, and its rent does not cover the payment. The monthly principal and interest on the assumed $112,500 loan is about $787 for both; add taxes and insurance and House A’s payment is about $1,053 while House B’s is about $1,362. A buyer who priced House B on GRM alone would be feeding it cash every month. This is why GRM is a screen, never the final underwriting.
A Wholesaler’s Step-by-Step GRM Workflow
As a wholesaler, you need to know what a landlord buyer will pay before you sign with the seller. GRM is a fast way to get there.
Step 1: Get each buyer’s number in their units
When you build your buy box for rental buyers, ask: “What’s the most you’ll pay relative to rent, all-in after repairs?” Write down whether they mean monthly or annual, whether the ceiling includes rehab, and what minimum cash-on-cash or DSCR they need on top of it. Buyers in the same city often have different ceilings for different zip codes.
Step 2: Screen leads in seconds
When a seller quotes a price, divide it by the likely market rent. If a seller wants $165,000 on a house that will rent for $1,475, that is a monthly GRM near 112 before repairs. If your buyers top out at 100 all-in, you already know the seller’s number does not work for a rental exit, and you can steer toward a lower price or a different exit before spending an hour on comps.
Step 3: Price a buy-and-hold deal backward
Hypothetical example using the subject from the comp table (market rent $1,475, market GRM 120):
- Buyer’s all-in ceiling: $1,475 × 100 = $147,500.
- Subtract the rehab the buyer will need to rent it: $20,000 (from your repair estimate). Buyer’s purchase price: $127,500.
- Subtract your assignment fee, say $10,000. Your maximum contract price with the seller: $117,500.
- Cross-check: the 70% rule on a $177,000 value with $20,000 repairs gives $103,900 for a flipper. The rental buyer can pay more than the flipper here, which tells you who to market to first.
- Before you send it out, run the buyer’s real numbers through the cash-on-cash return calculator with local taxes and insurance. If the expenses look like House B above, lower the price or move on.
This is the same backward logic as a wholesale offer built from MAO, except the starting number is rent instead of ARV.
Step 4: Price for BRRRR buyers differently
A BRRRR buyer cares about two numbers: what they have in the deal and what it will appraise for at refinance. GRM helps with the rent side, but do not tell a BRRRR buyer the house will appraise at “rent × GRM.” Fannie Mae’s Selling Guide says the income approach is required for two-to-four-unit properties, may be appropriate in one-unit neighborhoods when there is a substantial rental market, and that “appraisals that rely solely on the income approach as an indicator of market value are not acceptable.” Form 1004 even labels the section “not required by Fannie Mae.” On a single-family refinance, the sales comparison approach drives the number.
Hypothetical example: if the sales comps support $177,000 and the lender refinances at 75% of value, the new loan is $132,750. A buyer all-in at $147,500 leaves $14,750 in the deal. Show buyers that math with the BRRRR calculator instead of promising a full cash-out.
Step 5: Put the GRM support in your deal sheet
List the rented comps, their GRMs, the market rent support and the lease status. Experienced landlord buyers will check it. If the house is occupied, include the lease terms and deposit details covered in our tenant-occupied property guide.
State and Local Differences That Break GRM Comparisons
A GRM from one market means very little in another, mostly because expenses differ. The Tax Foundation’s state property tax comparison (updated September 2024) puts effective rates on owner-occupied housing from 0.28% in Hawaii to 2.38% in New Jersey. Get real insurance quotes for the address, too. A monthly GRM of 120 can be a strong deal in a low-tax county and a money loser in a high-tax, high-insurance one.
Rent trends matter too. Apartment List’s national rent report put the US median at $1,388 in September 2026, down 0.4% year over year, with multifamily vacancy at 7%. When rents are flat or soft, use current leased rents, not last year’s peak asking rents. Also check whether the city or state limits rent increases before assuming a below-market lease can be raised.
Finally, the rules for wholesaling itself (assignment disclosures, licensing triggers, marketing a property you have under contract) differ by state. Check your state’s page in the wholesaling by state directory before you market a rental deal.
Where Beginners Lose Money With GRM
- Mixing monthly and annual GRMs. The 12x error turns a sound deal into a fantasy or a fantasy into a “steal.”
- Using asking rent instead of leased rent. A listing that “should rent for $1,600” is not a comp. Inflated rent makes the GRM look better and the value look higher.
- Comparing across property types. A duplex GRM is not a single-family GRM. Neither is a GRM from a newer subdivision applied to a 1950s house with a crawlspace and old plumbing.
- Ignoring repairs in the price. A GRM on the purchase price alone hides the $20,000 the buyer must spend before the rent exists.
- Ignoring expenses. As House A and House B show, the same GRM can hide a cap rate gap of nearly 3 points. Tenant-paid vs owner-paid utilities alone can swing the result.
- Treating GRM as appraised value. Lenders lean on sales comps for one-unit homes. A BRRRR buyer who refinances short of expectations will not buy from you twice.
- Using GRM at all on a flip. If the exit is a retail sale to an owner-occupant, rent is irrelevant to the buyer. Use ARV.
If you want feedback on your rental comps and buyer pricing from someone who has done it, that is the kind of deal review we do in the mentorship program.
Gross Rent Multiplier FAQ
What is a good gross rent multiplier?
There is no national “good” number, and you should be skeptical of anyone who gives you one. A good GRM is one at or below what comparable rentals in that submarket sold for, on a property whose expenses still leave positive cash flow. Derive the local figure from rented comps, then confirm with cap rate and DSCR.
Is a lower GRM always better?
A lower GRM means more rent per dollar of price, all else equal. All else is rarely equal. A very low GRM can signal high taxes, high vacancy or heavy repairs, which are exactly the costs GRM ignores.
Do appraisers use a monthly or annual GRM?
On the Fannie Mae residential forms we reviewed (Form 1004 and Form 1025), the GRM is multiplied by monthly rent. Fannie Mae and Freddie Mac have also been rolling out a redesigned appraisal report (UAD 3.6); one lender announced it would accept those appraisals on GSE loans delivered on and after June 12, 2026 (Pennymac announcement 26-66). Whatever the form, ask which unit the number is in.
Can GRM be used for flips?
Not for pricing. A flip sells to an owner-occupant who pays based on comparable sales. GRM is only useful on a flip as a backup exit check: if the retail sale falls through, would the house work as a rental at the price you paid?
How many comps do I need for a market GRM?
There is no fixed rule, but four to six recent, rented, truly similar sales in the same submarket usually show whether the figures cluster. If they spread widely, your comps are not similar enough, or the market does not price these homes on rent, and you should lean on sales comps and NOI instead.
Does GRM work for multifamily?
For small 2–4 unit buildings, yes, and it is part of the required income approach on Fannie Mae appraisals of those properties. For larger buildings, rely on net operating income (NOI) and cap rate, because expenses differ too much between buildings for gross rent alone to be reliable.
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