How the GRM Calculator Works

One calculation engine produces every number on this site, from the homepage calculator to the tables on the GRM and price pages. This page documents what it does so you can check it.

The multiplier

annual gross income = (monthly rent + other monthly income) × 12
GRM                 = price / annual gross income
monthly GRM         = price / (monthly rent + other monthly income)
gross yield         = annual gross income / price
rent to price       = monthly rent / price

Rent to price uses rent alone, without other income, because that is how the 1% rule is quoted. The 1% rule is met when monthly rent is at least 1% of price.

Price and rent at a target GRM

price at target GRM  = annual gross income × target GRM
rent for target GRM  = price / target GRM / 12 − other monthly income

Implied cap rate

GRM ignores expenses. To show what a multiplier means, the calculator applies two stated assumptions:

effective gross income = annual gross income × (1 − vacancy %)
operating expenses     = effective gross income × expense ratio %
implied NOI            = effective gross income − operating expenses
implied cap rate       = implied NOI / price
                       = (1 − vacancy %) × (1 − expense ratio %) / GRM

Both assumptions are editable in the calculator. The implied cap rate is an estimate, not a substitute for a cap rate built from the property's actual taxes, insurance, dues and management.

Rating bands

• Very low: under 6
• Low: 6 to 8
• Typical: 8 to 12
• High: 12 to 16
• Very high: 16 and above

These describe where multipliers commonly fall across US residential markets. A specific property should be compared with sales in its own submarket.

Assumptions on the GRM and price pages

• Vacancy: 5% of gross income
• Operating expense ratio: 36% of collected income
• "Typical rent" on price pages: 0.85% of price per month, rounded to $25

Rounding

Rents in tables are rounded to the nearest $5 and dollar figures to the nearest dollar for display. Multipliers and percentages are computed from unrounded values, so a displayed rent may reproduce a GRM that differs in the second decimal.

Source code

The engine is a small TypeScript module with unit tests covering the multiplier, the solvers, the 1% rule check and the implied cap rate.