👋Multifamily Cap Rates vs Gross Rent Multiplier

[Justin Goodin]

When eyeing multifamily investments, you'll likely encounter two key metrics – cap rates and gross rent multipliers (GRM).

At first glance, they seem similar, but there are some important differences between the two.

The GRM simply divides the purchase price by the property’s total potential rental income–it doesn’t account for operating expenses.

Cap rates, on the other hand, factor in both income AND expenses to give a more complete profitability picture.

The main advantage of cap rates is their ability to evaluate better and compare investment returns, risks, and value. For this reason, they tend to be a more reliable tool for real estate investors.