GRM & GIM
~10 min read · Value with gross rent/income multipliers and know when they mislead.
Multipliers are the income approach in shorthand: GRM rides monthly rent for houses and small residential, GIM rides annual income for larger property — both extracted from sales, both blind to expenses, and the exam tests exactly that blindness.
The mechanics
Gross rent multiplier: GRM = sale price ÷ monthly gross rent, extracted from comparable rental-property sales; subject value = market rent × GRM. Gross income multiplier: GIM = price ÷ annual effective (or potential — be consistent) gross income, standard for commercial/multifamily. Extract from several sales, reconcile, apply to the subject's MARKET rent (not a stale contract rent).
- GRM: monthly basis (1-4 family convention)
- GIM: annual basis (larger property)
- Value = subject market rent × reconciled multiplier
The blindness
Multipliers skip vacancy and expenses entirely — assuming comparable properties share similar expense ratios. When they don't (subject pays owner-utilities, comps are tenant-paid; subject's taxes doubled at sale), the multiplier silently misvalues. Hence the rules: extract from properties with SIMILAR expense structures, same rent basis (unfurnished vs furnished), same market, and treat the result as a corroborating indication for income property rather than the lead approach.
- No expense line — the method's power and its flaw
- Comparable expense ratios are the hidden assumption
- Basis consistency: monthly vs annual, gross vs effective
Where each belongs
GRM: single-family rentals, condos, 2–4 units — where buyers actually think in rent multiples and expense data is thin. GIM: apartment and commercial sales where gross income is reliable but expense detail varies. Direct capitalization outranks both when NOI can be built honestly; the multiplier corroborates and sanity-checks.
Worked example
Three rental-house sales: $396,000 at $2,200/month (GRM 180); $370,500 at $1,950 (190); $412,000 at $2,250 (183). The subject rents at $1,900 on an old lease; market rent is $2,150. One comp's tenants pay all utilities while the subject's owner pays water ($90/month). Value the subject.
Reconcile the multipliers: 180–190, centering ~183–185 weighted toward the most similar sales — call it 184. Apply to MARKET rent, not the stale lease: 2,150 × 184 = $395,600, say $395,000. The utility wrinkle: the subject's owner-paid water means its gross rent buys less net than the tenant-pays comp's — a candidate for using an effective-rent adjustment (2,150 − 90 = 2,060 × 184 = $379,000) or for down-weighting that comp's multiplier; at minimum, the report notes the expense-structure difference. And the $1,900 contract rent belongs to leased-fee analysis, not this fee-simple shorthand. Multiplier applied, blindness managed.
Common exam pitfalls
Applying GRM to contract rent.
The multiplier came from market-rent relationships — apply it to the subject's MARKET rent; contract gaps belong to leased-fee analysis.
Mixing monthly and annual bases.
GRM is monthly, GIM annual — a multiplier applied on the wrong basis is off by twelvefold.
Ignoring expense-structure differences.
Multipliers assume similar expense ratios — owner-paid utilities and tax anomalies break the assumption; adjust or down-weight.
Price over rent, rent times the answer — quick, gross, and blind: keep the expense structures matched.
Recap
- GRM = price ÷ monthly rent; GIM = price ÷ annual income
- Extract from comparable sales; reconcile; apply to market rent
- No expense analysis — similar-expense-ratio assumption
- Basis and rent-definition consistency throughout
- Best for houses/small residential (GRM) and gross-reliable classes (GIM)
- Corroborates direct capitalization, rarely leads
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