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Excel guide · 4 min read

How to calculate the gross rent multiplier (GRM) in Excel

Quick answerGross rent multiplier (GRM) = property price / yearly gross rent. In Excel, with the price in B2 and the monthly rent in C2: =B2/(C2*12). The Maple St duplex at $385,000 with $3,200 a month of rent has a GRM of 10.0. A lower GRM means less price per dollar of rent, but GRM ignores vacancy and expenses, so compare listings on cap rate too.

Sample data

Every result on this page was calculated from this sheet by the same spreadsheet engine the Cellwise app uses.

ABCDEFGHIJKL
1ListingAsking priceMonthly rent (all units)Yearly gross rentGRMVacancy %Yearly operating expensesNOICap rateSettingValue
2Maple St duplex38500032003840010.0260416670.0511800246800.064103896104GRM to test (yours)9
3Harbor View triplex5200004600552009.42028985510.0619600322880.062092307692
4Linden Ave fourplex6100005800696008.76436781610.0827500365320.05988852459
5Ridge Rd house29800023502820010.5673758870.047900191720.06433557047
6Quarry Ln duplex3650003200384009.50520833330.0515400210800.057753424658

Download this sheet as an Excel practice file (.xlsx)

Step 1: Yearly gross rent for each listing

Put one listing per row: the asking price and the total monthly rent for all units, at today's rents or the rents in the listing. Gross rent means before anything comes off: no vacancy, no expenses, no mortgage.

Multiply by 12 for the year: =C2*12. Maple St's $3,200 a month is $38,400 a year.

If the listing shows rents per unit, add them up first. A fourplex at $1,450 a unit is $5,800 a month.

=C2*12

Result: 38400 shows as $38,400 with Currency format

38400: Maple St's yearly gross rent.

Step 2: GRM = price / yearly gross rent

Divide the price by the yearly rent: =B2/D2 in E2, copied down. Maple St is 10.03, which means the price is about 10 years of gross rent.

The five listings come out at 10.03, 9.42, 8.76, 10.57 and 9.51. Linden Ave has the lowest GRM: you pay the least per dollar of rent. Ridge Rd has the highest.

Some people work GRM on monthly rent instead (=B2/C2, which gives 120.3 for Maple St). Neither is wrong, but a monthly GRM is 12 times bigger, so make sure any GRM you compare with was worked out the same way.

=B2/D2

Result: 10.026041667 shows as 10.03 with Number format

About 10.03: Maple St costs about ten times its yearly gross rent.

Rank the listings by GRM

In Excel 365 or 2021, =SORTBY(A2:A6,E2:E6,1) lists the names from the lowest GRM to the highest. In older versions, sort the table by column E with Data > Sort.

This is a quick screen. It's useful when you have twenty listings and rent figures but no expense numbers yet, which is exactly when GRM is used most.

=SORTBY(A2:A6,E2:E6,1)

Result: spills 5 rows × 1 column

Linden Ave fourplex
Harbor View triplex
Quarry Ln duplex
Maple St duplex
Ridge Rd house

Spills the listings from lowest GRM to highest: Linden Ave, Harbor View, Quarry Ln, Maple St, Ridge Rd.

The price a GRM implies

Turn it around to see what a listing would cost at the GRM you want to test: price = yearly gross rent x GRM. Put your GRM in L2 (9 here is a sample) and use =D2*$L$2. At a GRM of 9, Maple St's rent supports a price of $345,600, about $39,400 below the asking price.

Or work out the rent a price needs: =B2/$L$2/12 is the monthly rent that would make Maple St a 9 GRM at its asking price, about $3,565.

This tells you what the numbers say, not what a property is worth or what to offer. Local rents, condition and financing all matter, and they aren't in a GRM.

=D2*$L$2

Result: 345600 shows as $345,600 with Currency format

345600: Maple St's price at a GRM of 9.

Why GRM can point the wrong way: add cap rate

GRM uses gross rent, so it can't see vacancy, property tax, insurance or repairs. Maple St and Quarry Ln both rent for $3,200 a month. Quarry Ln is cheaper, so its GRM is better (9.51 vs 10.03). But its yearly expenses are $15,400 against Maple St's $11,800.

Cap rate uses net operating income instead: rent after vacancy minus operating expenses, divided by price. =(D2*(1-F2)-G2)/B2 gives Maple St 6.41% and Quarry Ln only 5.78%. Once expenses are in, Maple St earns more per dollar of price.

The same thing happens at the bottom of the GRM list: Linden Ave has the lowest GRM but the second-lowest cap rate (5.99%) because of its 8% vacancy and higher costs. Use GRM to shortlist, then cap rate on the shortlist.

=(D6*(1-F6)-G6)/B6

Result: 0.057753424658 shows as 5.78% with Percent format

About 0.0578: Quarry Ln's cap rate, lower than Maple St's despite the better GRM.

Common mistakes

Mixing monthly and yearly GRM

Pick one. The yearly version (price / yearly rent) is the common one; a monthly GRM is 12 times bigger.

Using net rent or NOI

GRM uses gross rent before vacancy and expenses. A ratio on NOI is a cap rate, the other way up.

Comparing listings with different rent sources

Use the same basis for every row: current rents, or the market rents you expect, not a mix.

Treating the lowest GRM as the best deal

Check vacancy and expenses with a cap rate before you trust the ranking.

FAQ

What is the gross rent multiplier formula?

GRM = property price / yearly gross rent. In Excel: =price/(monthly_rent*12).

Is a lower GRM better?

A lower GRM means you pay less per dollar of gross rent, so it looks better on a first screen. It says nothing about expenses or vacancy, so compare cap rates before you decide.

What is the difference between GRM and cap rate?

GRM is price / gross rent and ignores costs. Cap rate is net operating income / price, so it includes vacancy and operating expenses. Neither includes the mortgage.

What is the difference between GRM and GIM?

The gross income multiplier (GIM) uses all gross income, such as parking, laundry or storage fees, as well as rent. If a property has other income, add it to the yearly rent and divide the price by the total.

Functions used

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