The short answer is yes, and no. Or perhaps more precisely: it depends.
By GRM, I am assuming that you are referring to Gross Rent Multiplier. There is also an effective gross rent multiplier (EGRM); and a Net Income Multiplier.
Traditionally, GRM is calculated by dividing the sales price by the annual Gross Rent, though it can also be done by using monthly rent as opposed to annual rent. It doesn't matter, as long as everyone is on the same page as far as the methodology and terminology.
Accordingly, directly, the cap rate, or the Overall Capitalization Rate, to be more precise, is not used to determine the Gross Rent Multiplier. Thus, technically speaking, if you know only the Cap Rate you can not determine the GRM.
You need the Gross Rent amount and the sales price. If you have the information to calculate the Net Operating Income, and the sales price, then you could calculate the Gross Rent Multiplier.
Simply put, GRM is the sales price divided by the Gross rent. I often look at it as a "shorthand" methodology for doing a quick analysis of a property when the only reliable information that I have handy is the gross rent, and the sales price. In the past, I have found it particularly useful when analyzing small to medium-size apartment complexes, but it can be an effective methodology for larger properties, and for other types of commercial real estate as well.
It is not particularly useful for properties with complex income streams, nor when there are significant variances in the expenses from one property to the next. To be accurate, when applying a gross rent multiplier derived from one property as an evaluation tool, there has to be uniformity with respect to the expense ratios of the two, or more, properties.
Jun 20, 2012