What does the gross rent multiplier (GRM) estimate?

The gross rent multiplier (GRM) is a calculation used primarily in real estate to estimate the potential income a property can generate from rents. Specifically, it provides an estimate of the gross monthly income of a property by analyzing the relationship between the purchase price of the property and its rental income.

To use the GRM, you divide the property's sale price by the gross monthly rent it generates. This ratio helps investors quickly assess the value of a rental property based on its income, allowing for easier comparisons among similar investments.

While gross annual income and net income are important metrics in real estate, they are not directly conveyed by the GRM. Gross annual income would require an adjustment to the monthly figures, and net income accounts for operating expenses, which are not reflected in the simple GRM calculation. Therefore, the correct option focuses on the gross monthly income, which is the primary use of the GRM in evaluating investment properties.