What is the formula for calculating the gross rent multiplier (GRM)?

The gross rent multiplier (GRM) is a metric used in real estate to assess the value of income-producing properties. The correct formula for calculating GRM is based on the property's purchased price in relation to its gross annual rental income. By using gross annual rental income in the calculation, you can determine how many times the annual rental income is contained within the property's price.

This approach provides a straightforward method to evaluate potential investment properties, helping investors quickly assess whether a property is fairly priced based on its income potential. Using the gross rental income (which does not account for operating expenses) simplifies the calculation and allows for comparisons across different properties without needing to analyze each property’s expenses in depth.

Therefore, the formula you mentioned is accurate: GRM equals the property price divided by the gross annual rental income, making it a useful tool for real estate professionals and investors.