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The last 12 months have seen a wild ride for real estate markets across the country.
Median home prices jumped 4.99% nationwide as of the end of March 2023 since the same time in 2022, at $334,268. While that sounds all right — and it is by historical standards — it leaves out plenty of context.
First, that growth rate marks a sharp fall from the lofty 19.58% appreciation in 2021 or even the 10.77% growth in 2022. Second, it fails to capture how housing markets started 2022 with a bang and ended it with a whimper. Hundreds of cooling cities across the U.S. saw home prices fall last quarter.
Meanwhile, median rents grew at a respectable 5.95% annually to close the first quarter of 2023 at $1,996. But that too pales beside the 13.89% growth in 2021 and 7.45% growth in 2022, as rents started losing steam in late 2022 as well.
All that said, some cities offer far better yields than others. Below you’ll find the top 300 cities in the U.S. by population, mapped with their GRM, median rent, and median home price.
What Is GRM (Gross Rent Multiplier)
Gross rent multiplier is one of those real estate terms that sounds more complicated than it is. It’s actually one of the easiest concepts in real estate investing.
Quite simply, gross rent multiplier is the ratio between a home’s price and its gross annual rental income. Just divide the price by the gross annual rents, and you get the ratio:
GRM = Price of Property/Gross Annual Rental Income
For example, if a property costs $150,000, and it generates gross rental income of $15,000 per year, the GRM is 10 ($150,000 / $15,000 = 10). Lower is better for GRM, indicating higher rents and lower prices.
Here’s a quick GRM calculator in case you don’t love math:
Another way to think of GRM is the number of years it would take for a property to pay for itself in gross rents. If a property generates $15,000 per year, and costs $150,000 to buy, it would take 10 years to pay for itself. Not including expenses, that is.
Which makes an important point: GRM doesn’t include expenses the way cap rates do. That makes it a simpler — but less accurate — calculation.
Best Cities for Real Estate Investing by GRM
The following map shows the top 280 cities in the country by population:
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