What a Gross Rent Multiplier of 15 Means

A GRM of 15 means the purchase price equals 15 years of gross rent. A GRM of 15 is high. Buyers here are paying for appreciation and location more than for rent. A financed purchase at this multiplier will not cover its own payment without a large down payment.

A 15x GRM on a $300,000 property

Rent needed: $1,665 a month, $19,980 a year
Rent as a percent of price: 0.56% (below the 1% rule, which is a GRM of 8.3)
Gross yield: 6.7%
Collected after 5% vacancy: $18,981
Implied NOI at a 36% expense ratio: $12,148
Implied cap rate: 4.05%

The implied lines are what a 15x 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 15 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	$555	$6,660	0.56%
$150k	$835	$10,020	0.56%
$200k	$1,110	$13,320	0.56%
$250k	$1,390	$16,680	0.56%
$300k	$1,665	$19,980	0.56%
$350k	$1,945	$23,340	0.56%
$400k	$2,220	$26,640	0.56%
$500k	$2,780	$33,360	0.56%
$600k	$3,335	$40,020	0.56%
$750k	$4,165	$49,980	0.56%
$1m	$5,555	$66,660	0.56%

Cap rate a 15x 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%	4.75%	4.60%
30%	4.43%	4.29%
36%	4.05%	3.93%
40%	3.80%	3.68%
45%	3.48%	3.37%
50%	3.17%	3.07%

Check your own property against 15x

The calculator is loaded with the example above and a target GRM of 15. Replace the numbers with yours.

Gross rent multiplier

15.02x

High

High. Twelve to sixteen years of gross rent. Appreciation markets. Hard to cash flow with a loan.

$300,000 price / $19,980 gross rent

Gross screens

Rent to pricemonthly rent / price: 0.56%
1% ruleneeds $3,000 a month: Below it
Gross yieldannual gross rent / price: 6.66%
Monthly GRMprice / monthly rent: 180
Gross paybackyears of gross rent to equal price: 15.0 yrs

At a 15.0x GRM

Price this rent supports: $299,700
Asking is above that by: $300
Rent needed at asking pricevs $1,665 now: $1,667

What this GRM implies

Collected after vacancy: $18,981
Operating expenses36% of collected: -$6,833
Implied NOI: $12,148
Implied cap rate: 4.05%

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 15 questions

Is a GRM of 15 good?

Not for income. A 15x GRM means rent is only about 0.56% of price per month, which will not carry a mortgage with a standard down payment. It can still be a reasonable buy in a strong appreciation market, but the return will come from price growth, not rent.

What rent do I need for a GRM of 15 on a $300,000 property?

$1,665 a month, or $19,980 a year. Divide the price by the GRM and then by twelve: $300,000 / 15 / 12 = $1,667.

What cap rate does a GRM of 15 imply?

About 4.1% 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.