What is Gross Rent Multiplier (GRM)?
In a recent blog post, I explained the use of Cap Rate by investors as a financial technique to estimate value when considering the buying or selling of a multi-family apartment building.  Another metric used in real estate is Gross Rent Multiplier (GRM).  Like Cap Rate, GRM is simply a gauge of value, but it can be used to quickly compare investment opportunities.  GRM accounts for the gross rents as measured against the selling price. It's calculated by taking the price and dividing it by the total annual gross rent.  For example, a price of $1 million divided by $100,000 in gross rent produces a GRM of 10.  Generally, GRM's in the Northern Virginia region vary widely between 6 and 16 based upon building location, rent level, age, and class.  Generally, the higher the GRM the better the building and lower the perceived risk.  Likewise, the higher the GRM the longer it will take an investor to recover their investment, meaning a lower ROI.

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