GRM is sale price divided by annual gross rent — a quick-look valuation heuristic. LA multifamily GRMs typically run 10x to 18x depending on submarket.
GRM is popular because it's simple. Take the sale price, divide by annual gross scheduled rent, and you get the multiplier. A building selling for $6 million on $400,000 annual rent has a GRM of 15.
The limitation: GRM ignores operating expenses. A building with 35% operating costs and one with 55% operating costs can have the same GRM but very different cash flows. This is why cap rate (which incorporates NOI) is a more precise valuation metric for serious underwriting.
LA multifamily GRM ranges: Westside premium 16–18x, core LA City 14–16x, Valley 12–14x. Use GRM as a sanity check, not a primary valuation method. Cap rate on in-place NOI is the gold standard.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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