Legal Definitions - gross-rent multiplier

Definition: The gross-rent multiplier (GRM) is a ratio that measures the relationship between the market value of a rental property and its annual gross rental income. It is used as a method to estimate a property's market value.

Example: If a rental property has an annual gross rental income of $50,000 and a market value of $500,000, the gross-rent multiplier would be 10 ($500,000 ÷ $50,000 = 10). This means that the property's market value is 10 times its annual gross rental income.

The gross-rent multiplier is a useful tool for real estate investors and appraisers to quickly estimate the value of a rental property. By comparing the GRM of similar properties in the same area, they can determine if a property is overpriced or a good investment opportunity.