How to use GRM
GRM = property price ÷ annual gross rent. A $300,000 house renting for $2,500/month ($30,000/yr) has a GRM of 10. Investors use GRM to compare similar properties in the same area and to sanity-check asking prices: value ≈ market GRM × annual rent.
GRM ignores expenses, so two properties with the same GRM can have very different profits. Move on to cap rate (which uses NOI) once a property looks promising.
What is a good GRM?
There is no universal number. Lower is better; single-digit GRMs are typical of cash-flow markets, while 15–20+ is common in expensive metros.