NY Real Estate Prep

The gross rent multiplier formula

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GRM = Sale Price / Monthly Gross Rent. How to derive a multiplier from a comparable and apply it, with NY exam examples.

GRM = Sale Price ÷ Monthly Gross Rent
Annual version (GIM) = Sale Price ÷ Annual Gross Income

How to solve it, step by step

  1. Take a comparable property that has sold and divide its price by its monthly gross rent to derive the GRM.
  2. Apply that multiplier to the subject property’s monthly rent.
  3. Keep monthly with monthly, annual with annual.

Worked examples

A $300,000 property rents for $2,000 a month. GRM = $300,000 ÷ $2,000 = 150.
Applying it: a comparable property renting at $2,500/month with a GRM of 150 is worth $2,500 × 150 = $375,000.

What the NY exam actually asks

GRM is a quick comparison tool, not a precise valuation. The exam wants you to derive the multiplier from a sold comparable, then apply it to a subject property.

Try one yourself

A comparable sold for $420,000 and rented for $2,800 a month. The subject property rents for $3,100 a month. What is the indicated value?

Show the answer

$465,000. The GRM is $420,000 ÷ $2,800 = 150. Applied to the subject: $3,100 × 150 = $465,000.

Common mistakes

  • Mixing monthly and annual rent. GRM uses monthly; GIM uses annual. They are not interchangeable.
  • Treating GRM like a cap rate. GRM uses gross rent and ignores expenses entirely.
  • Dividing rent by price instead of price by rent.

Questions students ask

Does GRM account for expenses?

No. It uses gross rent only, which is why it is a rough screening tool rather than a valuation method.

What is the difference between GRM and GIM?

GRM uses monthly gross rent. GIM uses annual gross income. The multipliers are very different, so do not mix them.

Related formulas

Practise this. The free 10-question math quiz drills these formulas, and the free timed practice exam puts them under exam conditions.
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