Market Value

Market value is the price you would expect in an ordinary sale where the buyer and seller are informed and nobody is rushed. Gross rent multiplier divides price by annual rent; for a property you already own, current market value replaces the purchase price in the numerator and gives the multiplier a buyer sees today.

A property bought at $400,000 that now rents for $50,000 and is worth $500,000 has a GRM of 8 on cost and 10 on market value. The first describes the deal you got; the second describes the asset now and is what a buyer or lender would compute.

The formula also runs backwards to estimate market value: annual rent times the GRM comparable properties sold at. That is the gross income multiplier form of the income approach. Because it ignores expenses, treat the result as a range and confirm it with a cap rate valuation before relying on it for an offer or a sale.