What a Gross Rent Multiplier of 11 Means

A GRM of 11 means the purchase price equals 11 years of gross rent. A GRM of 11 is typical of most US metros. Income is real but thin relative to price, and whether the property cash flows depends on taxes, insurance and the interest rate more than on the rent.

A 11x GRM on a $300,000 property

Rent needed: $2,275 a month, $27,300 a year
Rent as a percent of price: 0.76% (below the 1% rule, which is a GRM of 8.3)
Gross yield: 9.1%
Collected after 5% vacancy: $25,935
Implied NOI at a 36% expense ratio: $16,598
Implied cap rate: 5.53%

The implied lines are what a 11x GRM means if the property's costs are typical. Real taxes, insurance and dues move the cap rate while leaving the GRM unchanged, which is the reason GRM is a screen and not an underwriting number.

Rent needed for a GRM of 11 at other prices

The rent-to-price column is constant because GRM is a pure ratio of the two. Price only changes the dollar figure.

Price	Monthly rent	Annual rent	Rent / price
$100k	$760	$9,120	0.76%
$150k	$1,135	$13,620	0.76%
$200k	$1,515	$18,180	0.76%
$250k	$1,895	$22,740	0.76%
$300k	$2,275	$27,300	0.76%
$350k	$2,650	$31,800	0.76%
$400k	$3,030	$36,360	0.76%
$500k	$3,790	$45,480	0.76%
$600k	$4,545	$54,540	0.76%
$750k	$5,680	$68,160	0.76%
$1m	$7,575	$90,900	0.76%

Cap rate a 11x GRM implies at different expense ratios

The same GRM produces very different cap rates depending on what it costs to run the property. Single-family rentals in low-tax states run 25 to 35%. High-tax states, condos with dues, and older multifamily run 40 to 50%.

Expense ratio	Cap rate at 5% vacancy	Cap rate at 8% vacancy
25%	6.48%	6.27%
30%	6.05%	5.85%
36%	5.53%	5.35%
40%	5.18%	5.02%
45%	4.75%	4.60%
50%	4.32%	4.18%

Check your own property against 11x

The calculator is loaded with the example above and a target GRM of 11. Replace the numbers with yours.

Gross rent multiplier

10.99x

Typical

Typical. Eight to twelve years of gross rent, where most US metros trade. Cash flow depends on expenses and financing.

$300,000 price / $27,300 gross rent

Gross screens

Rent to pricemonthly rent / price: 0.76%
1% ruleneeds $3,000 a month: Below it
Gross yieldannual gross rent / price: 9.10%
Monthly GRMprice / monthly rent: 132
Gross paybackyears of gross rent to equal price: 11.0 yrs

At a 11.0x GRM

Price this rent supports: $300,300
Asking is below that by: $300
Rent needed at asking pricevs $2,275 now: $2,273

What this GRM implies

Collected after vacancy: $25,935
Operating expenses36% of collected: -$9,337
Implied NOI: $16,598
Implied cap rate: 5.53%

GRM skips expenses. These lines show what the ratio means if this property's costs are typical. Replace them with real figures before you rely on it.

GRM of 11 questions

Is a GRM of 11 good?

It is average. A 11x GRM is in the 8 to 12 range where most US metros trade. The property may or may not cash flow depending on expenses and financing, so it is worth running the full cap rate.

What rent do I need for a GRM of 11 on a $300,000 property?

$2,275 a month, or $27,300 a year. Divide the price by the GRM and then by twelve: $300,000 / 11 / 12 = $2,273.

What cap rate does a GRM of 11 imply?

About 5.5% with 5% vacancy and operating expenses at 36% of collected rent. The formula is (1 minus vacancy) times (1 minus expense ratio) divided by GRM. Higher taxes, HOA dues or insurance push the real cap rate lower than the implied figure.