Gross Rent Multiplier on a $400,000 Rental Property
A $400,000 rental needs $4,165 a month in rent for a GRM of 8, $3,335 for a GRM of 10 and $2,780 for a GRM of 12. The 1% rule would require $4,000. At a typical $3,400, the GRM is 9.8.
Rent needed at each GRM on $400,000
Divide $400,000 by the multiplier and by twelve. The implied cap rate assumes 5% vacancy and expenses at 36% of collected rent.
| GRM | Monthly rent | Rent / price | Implied cap rate |
|---|---|---|---|
| 4x | $8,335 | 2.08% | 15.2% |
| 5x | $6,665 | 1.67% | 12.2% |
| 6x | $5,555 | 1.39% | 10.1% |
| 7x | $4,760 | 1.19% | 8.7% |
| 8x | $4,165 | 1.04% | 7.6% |
| 9x | $3,705 | 0.93% | 6.8% |
| 10x | $3,335 | 0.83% | 6.1% |
| 11x | $3,030 | 0.76% | 5.5% |
| 12x | $2,780 | 0.69% | 5.1% |
| 13x | $2,565 | 0.64% | 4.7% |
| 14x | $2,380 | 0.60% | 4.3% |
| 15x | $2,220 | 0.56% | 4.1% |
| 16x | $2,085 | 0.52% | 3.8% |
GRM at different rents on a $400,000 property
The same table the other way around: start from a rent and read off the multiplier. Rent-to-price and GRM are the same fact in different units.
| Monthly rent | Rent / price | GRM | Gross yield | Implied cap rate |
|---|---|---|---|---|
| $2,000 | 0.5% | 16.7 | 6.0% | 3.6% |
| $2,400 | 0.6% | 13.9 | 7.2% | 4.4% |
| $2,800 | 0.7% | 11.9 | 8.4% | 5.1% |
| $3,200 | 0.8% | 10.4 | 9.6% | 5.8% |
| $3,600 | 0.9% | 9.3 | 10.8% | 6.6% |
| $4,000 | 1.0% | 8.3 | 12.0% | 7.3% |
| $4,400 | 1.1% | 7.6 | 13.2% | 8.0% |
| $4,800 | 1.2% | 6.9 | 14.4% | 8.8% |
| $6,000 | 1.5% | 5.6 | 18.0% | 10.9% |
What the multiplier does not tell you about a $400,000 property
Two $400,000 properties at $3,400 rent have the same GRM of 9.8. If one carries $4,800 a year in HOA dues or sits in a state with a 2% property tax rate, its real cap rate can be one to two points below the other's. GRM sorts listings. It does not underwrite them. The GRM vs cap rate guide covers where the shortcut stops.
Run the $400,000 property yourself
Preloaded with $3,400 rent. Change the rent, the target GRM, or the expense assumptions to match the property.
Gross rent multiplier
9.80x
TypicalTypical. Eight to twelve years of gross rent, where most US metros trade. Cash flow depends on expenses and financing.
$400,000 price / $40,800 gross rent
Gross screens
- Rent to pricemonthly rent / price
- 0.85%
- 1% ruleneeds $4,000 a month
- Below it
- Gross yieldannual gross rent / price
- 10.20%
- Monthly GRMprice / monthly rent
- 118
- Gross paybackyears of gross rent to equal price
- 9.8 yrs
At a 8.0x GRM
- Price this rent supports
- $326,400
- Asking is above that by
- $73,600
- Rent needed at asking pricevs $3,400 now
- $4,167
What this GRM implies
- Collected after vacancy
- $38,760
- Operating expenses36% of collected
- -$13,954
- Implied NOI
- $24,806
- Implied cap rate
- 6.20%
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.
$400,000 rental GRM questions
What is a good GRM for a $400,000 property?
The same as for any property in its market. Price does not change the benchmark; the rent-to-price ratio does. If comparable rentals nearby sell at a GRM of 9, a $400,000 property is fairly priced at about $3,705 a month in rent. At $3,400 it has a GRM of 9.8.
How much rent does a $400,000 property need to meet the 1% rule?
$4,000 a month, which is a GRM of 8.3. At $3,400 the property is below the rule. Under typical expenses the 1% rule corresponds to a cap rate near 7.3%.
What cap rate does a $400,000 property at $3,400 rent have?
About 6.2% if vacancy is 5% and operating expenses are 36% of collected rent. That is an estimate from the GRM, not a real cap rate. Actual taxes, insurance, HOA and management for the property will move it.
Related: what a GRM of 8 means, GRM and the 1% rule, the GRM formula.