Cap Rate vs GRM Calculator
Property metric comparison.
Compare Cap Rate and GRM for comprehensive property analysis. Enter property price and gross rent to see both cap rate and grm for property investment analysis.
What this tool does
Cap rate (NOI divided by price) and gross rent multiplier (price divided by annual gross rent) are two common property-screening metrics used to compare investments at a glance. Given property price, annual gross rent, and annual operating expenses, this calculator returns both the cap rate and GRM alongside the net operating income (NOI) that underpins the cap rate calculation. Cap rate output reflects the relationship between a property's operating profit and its purchase price, while GRM expresses price relative to rental income alone. The cap rate result is most sensitive to changes in operating expenses and purchase price, while GRM depends only on price and rental figures. Neither metric accounts for financing costs, vacancy rates, capital expenditure, or appreciation. Both outputs are for comparative illustration across properties and markets.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Cap Rate and GRM measure property value differently. GRM = price / annual gross rent (uses gross rent only). Cap Rate = NOI / property price (uses net operating income after expenses). GRM ignores expenses entirely; Cap Rate captures full operating economics. Use both for proper deal analysis.
Example: 400k property, 24k annual gross rent, 10k operating expenses (taxes, insurance, maintenance, management). GRM = 16.67. NOI = 14k. Cap rate = 3.5%. The same property looks different through each lens. GRM might attract attention; Cap Rate reveals lower-than-market returns due to high expenses.
Why both metrics matter: GRM screens deals quickly (just need price and rent). Cap Rate gives true unleveraged yield once you have expense data. Properties with same GRM but different expense profiles have very different actual returns. 400k property with 30% expense ratio outperforms same-priced property with 50% expense ratio - despite identical GRM.
Run it with sensible defaults
Using property price of 400,000, annual gross rent of 24,000, annual operating expenses of 10,000, the calculation works out to 16.67x / 3.50%. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Property Price, Annual Gross Rent, and Annual Operating Expenses — do not pull with equal force. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the option with the lower calculated total changes.
How the math works
GRM = price / gross rent. Cap rate = NOI / price (NOI = gross rent - operating expenses).
Using this well
What this doesn't capture
Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.
££400,000, ££24,000 rent, ££10,000 ops = 16.67x / 3.50%.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator computes two common real estate valuation metrics from property price, annual gross rent, and annual operating expenses. The Gross Rent Multiplier (GRM) divides the property price by annual gross rent, expressing how many years of rental income the purchase price represents. The Cap Rate divides net operating income (NOI) by property price, where NOI is calculated as annual gross rent minus annual operating expenses. Both metrics assume constant annual figures and do not account for property appreciation, vacancy rates, financing costs, capital expenditure, tax effects, or market cycle timing. The results are presented as ratios and percentages respectively, useful for comparing properties or assessing relative value, though they represent single-point snapshots rather than projections of future performance.
References
Frequently Asked Questions
Cap Rate vs GRM - which is better?
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