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Gross rent multiplier (GRM) calculator
Screen an apartment building or other income property in seconds. Enter the price and the gross annual income to get the gross rent multiplier, add the unit count for price per unit and income per unit, and an NOI for the cap rate. Works in Canadian or US dollars; nothing leaves your browser.
Results
- Gross rent multiplier
- 12.50x
- Price per unit
- $275,000
- Gross income per unit per month
- $1,833.33
- Cap rate on price
- 4.80%
- NOI as % of gross income
- 60.0%
- Price at 11.50x
- $6,072,000
Works in Canadian or US dollars: enter every amount in the same currency. Calculated in your browser; nothing is sent or saved.
How it’s calculated
- Gross rent multiplier
GRM = price ÷ gross annual income - Price per unit
Price per unit = price ÷ number of units - Price at a target GRM
Price = gross annual income × target GRM
Worked example (illustrative numbers)
- A 24-unit apartment building is listed at $6,600,000 and produces gross annual income of $528,000 (all rents and other income, before expenses).
- GRM = 6,600,000 ÷ 528,000 = 12.50x. Price per unit = 6,600,000 ÷ 24 = $275,000, and gross income averages $1,833.33 per unit per month.
- With an NOI of $316,800 the cap rate on the asking price is 4.80%, and NOI is 60.0% of gross income.
- A buyer who will only pay 11.50x gross income would value the same income at 528,000 × 11.5 = $6,072,000.
Illustrative figures for a fictitious building; they are not market GRMs, rents or cap rates for any city.
What the gross rent multiplier is for
The gross rent multiplier compares a property's price with the income it brings in before any expenses. It is a screening tool: quick to calculate from a listing sheet, easy to compare across buildings of different sizes, and common in apartment (multi-family) and small mixed-use listings where every building has similar kinds of costs.
Because it ignores expenses, the GRM can mislead when two buildings are run very differently. A building where the landlord pays heat and hydro, or that carries high realty taxes, will produce less NOI from the same gross income. That is why buyers move from the GRM to the NOI and cap rate as soon as they have an operating statement, and why this calculator shows both when you enter an NOI.
Annual or monthly income
Commercial and apartment brokers usually calculate the GRM on gross annual income, which is what this calculator does. Some single-family and small residential investors use gross monthly rent instead, which gives a number twelve times larger. Always state the basis next to the figure, and whether the income is in-place (today's rents) or pro forma (after rent increases or lease-up).
Gross income should include every recurring source: rents, parking, laundry, storage and similar. Say whether you have deducted a vacancy allowance; some buyers call income after vacancy "effective gross income" and calculate a separate multiplier on it.
Price per unit and the unit mix
Price per unit (or per suite, or per door) is the other quick comparison for apartment buildings. It is only meaningful next to the unit mix: a building of bachelor and one-bedroom suites will trade at a lower price per unit than one of large two- and three-bedroom suites, even at the same GRM.
OfferingStack's offering memorandum has a Unit Mix page (unit type, count, average size, in-place and market rent) and shows Price / Unit and GRM in the headline metrics, labelled as calculated with their formula, when the price, unit count and gross income are entered. Fields without data are left out rather than shown empty.
Estimates for marketing and screening only. This is not an appraisal, a valuation opinion, a measurement certificate, or financial, legal or tax advice.
Questions
How do you calculate the gross rent multiplier?
Divide the price by the gross annual income. A building priced at $6,600,000 with $528,000 of gross annual income has a GRM of 12.50x.
What is the difference between GRM and cap rate?
The GRM uses gross income before expenses; the cap rate uses net operating income after vacancy and operating expenses. The cap rate is the better measure of return, but it needs an operating statement; the GRM only needs the rents.
Is a lower GRM better?
For a buyer, a lower GRM means paying less for each dollar of gross income, but it can reflect higher expenses, older buildings, below-market rents that can't easily be raised, or a weaker location. Compare GRMs only between similar buildings with similar expense structures.
Should I use monthly or annual rent?
Use annual gross income for commercial and apartment listings, as this calculator and OfferingStack's offering memorandum do. If you see a GRM in the 100s, it was probably calculated on monthly rent.
Is my data saved?
No. The calculation runs in your browser and nothing you type is sent to OfferingStack.
Related
Put the numbers in a finished offering memorandum.
Upload your fact sheet or rent roll, add the NOI and price, and review a watermarked preview of the financial and pricing pages before you buy anything.