Faro Labs / Tools / Gross rent multiplier calculator
Gross rent multiplier calculator
The fastest way to screen a rental: how many years of gross rent equal the price. Lower is better. It's a filter to sort a list quickly, not a substitute for a full underwrite.
Between 7 and 12. Typical for balanced markets. Whether it cash-flows depends on the expense load and your financing.
GRM ignores expenses. Once a property passes, check the real yield with the cap rate calculator.
How GRM works
target price = annual gross rent × your target GRM
GRM is deliberately crude. It ignores vacancy, taxes, insurance, management, and financing. Everything that turns gross rent into actual profit. That's the point: it's a five-second filter for deciding which listings deserve a real analysis. A property at a 6× GRM and one at a 14× GRM are worth very different amounts of your attention, and GRM tells you that instantly without a spreadsheet.
Where it breaks down
Because it ignores expenses, GRM can flatter a property with an unusually high tax burden, heavy deferred maintenance, or expensive management. Two properties can share a GRM and have wildly different cap rates. Treat GRM as the first gate, never the decision.
GRM questions
What is a good gross rent multiplier?
Lower is better, because it means less price per dollar of rent. Roughly 4 to 7 is strong cash-flow territory, 8 to 12 is typical for balanced markets, and above 12 usually means you're paying for appreciation rather than income. It's market-dependent: compare against local comparable sales, not a national rule.
GRM vs. cap rate: what's the difference?
GRM uses gross rent and ignores expenses, so it's a fast screen. Cap rate uses net operating income after expenses, so it's the real income yield. Use GRM to sort a long list quickly, then run cap rate and cash-on-cash on the handful that survive.
Should GRM use monthly or annual rent?
The convention is annual gross rent: price divided by yearly rent. This calculator lets you enter monthly rent and annualizes it. The only rule that matters is consistency: compare two properties the same way.
Every calculator
Past the screen, into the real number.
Faro takes a listing from GRM to a full underwrite, expenses, financing, and a target price, in one paste.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.