Understanding GRM (Gross Rent Multiplier): What It Is and How It’s Used to Evaluate Multifamily Real Estate

When it comes to valuing an apartment building—whether in Los Angeles, Ventura County, or anywhere in Southern California—one of the most common (and quickest) initial valuation tools investors use is the GRM, or Gross Rent Multiplier. While GRM isn’t the only metric that matters, it’s often the first step buyers take to understand the relationship between a property’s price and its income.

If you're thinking about selling a multifamily property in Los Angeles, understanding how GRM works will help you better interpret offers, compare your building to comps, and set realistic expectations based on market conditions.

What Is GRM (Gross Rent Multiplier)?

GRM is a simple ratio that compares the price of a property to its gross rental income.

GRM Formula

GRM = Property Price ÷ Gross Annual Rental Income

Example:

If an 8-unit apartment building is listed for $2,400,000 and produces $160,000 in gross annual rent:

GRM = $2,400,000 ÷ $160,000 = 15.0

This means the property is trading at 15 times its annual rental income.

Why Investors Use GRM

Investors use GRM because it’s:

• Quick and easy to calculate

• Useful for comparing similar buildings

• A simple way to determine if a property is priced above or below the market

• A starting point for investors before diving into deeper financial analysis

GRM helps owners and buyers quickly answer one question:How many years of gross rent would it take to “pay back” the purchase price?

How GRM Helps in Valuing Apartment Buildings

While GRM is not a complete valuation tool on its own, it provides an important early benchmark in the pricing process.

1. Comparing Your Property to Recently Sold Comps

If similar buildings in West LA, Hollywood, or the Valley sold at a 14–16 GRM, and your building calculates to 22 GRM, your pricing may be above market.

2. Understanding Market Trends

Rising GRMs often indicate:

• Lower rents

• Higher prices

• Stronger buyer demand

• Aggressive underwriting

Falling GRMs can indicate the opposite.

3. Setting Expectations Before Listing

Sellers can benchmark their property against:

• Active comps (which often have inflated seller expectations)

• Sold comps (which reflect actual market behavior)

• Neighborhood averages (GRMs vary widely across LA County)

4. Quickly Screening Offers

A buyer offering a price at a much lower GRM than market norms may be lowballing.

A buyer targeting a GRM consistent with recent comps is more realistic.

Limitations of GRM (and Why You Shouldn’t Rely on It Alone)

Although GRM is helpful, it has important limitations:

1. GRM Doesn’t Consider Expenses

Two buildings with the same GRM can have completely different:

• Property taxes

• Insurance

• Maintenance

• Utilities

• Vacancy

• Management structure

That’s why investors eventually move to metrics like Cap Rate.

2. GRM Doesn’t Account for Rent Control or Loss-to-Lease

Older LA buildings with long-term tenants may look attractive on GRM but have little upside.

3. GRM Doesn’t Reflect Future Rent Growth

A building with ADU potential may have a higher GRM today but be better long-term.

4. GRM Doesn’t Factor in Financing

Debt terms, interest rates, IO periods, and amortization all impact achievable returns.

How GRM Fits Into a Full Multifamily Valuation

Serious buyers use GRM early in the process, then follow up with:

• Cap Rate Analysis

• Cash-on-Cash Return

• IRR Calculations

• Rent Roll Review

• Comparable Sales

• Unit Mix / ADU Potential

• Renovation / Value-Add Opportunities

• Regulatory factors (RSO, AB 1482, etc.)

At JML Real Estate Group, we combine GRM with deep market data, neighborhood insights, and detailed financial underwriting to determine the most accurate property value.

Thinking About Selling an Apartment Building in Los Angeles?

Understanding your building’s GRM is only the beginning. The real value comes from knowing:

• How your rents compare to the market

• Whether upside exists

• What similar buildings actually sold for

• How investors will underwrite your income and expenses

• What your property is worth in TODAY’S market

If you’d like a confidential and detailed valuation of your apartment building anywhere in Los Angeles or Ventura County, my team and I would be happy to provide one.

No pressure. No obligation. Just real data and honest guidance.