Gross rent multiplier (GRM) is a property's price divided by the gross rent it collects in a year. It tells you how many dollars you pay for each dollar of annual rent, before any expenses.
GRM = property price ÷ annual gross rent
A triplex listed at $300,000 rents for $2,500 a month in total, or $30,000 a year. Its GRM is $300,000 ÷ $30,000 = 10. A similar triplex down the street with the same rent is listed at $270,000, so its GRM is 9. Lower means you are paying less for the same rent. You can also flip the formula to estimate value: if comparable properties sell at a GRM of 10, a building with $30,000 of annual rent is worth roughly $300,000.
GRM is a fast first screen, not a verdict. It ignores vacancy, taxes, insurance, repairs and financing, so two properties with the same GRM can produce very different cash flow. Compare it only among similar properties in the same area, then move on to cap rate, which accounts for expenses. One more thing to watch: some people calculate GRM with monthly rent instead of annual rent, which gives a number 12 times larger. Make sure both figures you are comparing use the same version.