Imputed Rent

Imputed rent is the rent an owner-occupied home would earn if it were rented out, treated as income the owner effectively pays themselves. Economists use it to compare owning with renting. It is also how a gross rent multiplier can be applied to homes that are not rentals.

A homeowner can divide the home's value by the rent it would command to get an implied GRM. A $500,000 home that would rent for $4,000 a month has an implied GRM of 10.4. The same number shows the trade-off between owning and renting a similar home.

Housing economists apply the same idea across whole markets as the price-to-rent ratio. Where it is high, renting is cheap relative to buying and rental yields are thin. Where it is low, buying is cheap relative to renting, which is usually where investors find rentals with lower GRMs.

Further reading: Imputed Rent on Wikipedia.