Gross yield, gross rent multiplier, and cap rate are three ways of quoting the exact same thing: how much income a building produces relative to what it costs. Two of them are literally the same fraction flipped over. The third deducts expenses first — and that one difference is worth tens of thousands of dollars of hidden value on an ordinary deal. Sellers, agents, and listing sites switch between the three quotes freely, sometimes strategically, so knowing how to convert between them — and which one to trust at each stage of a deal — is a core underwriting skill. This post defines all three, works them on the same $250,000 duplex, gives you a conversion table, and shows the trap where two properties with identical gross yields sit 22% apart on cap rate.
The three metrics, defined
Gross yield is annual gross rent divided by purchase price. A property renting for $28,800 a year at a $250,000 price has an 11.5% gross yield. No expenses, no vacancy, no financing — just rent over price.
Gross rent multiplier (GRM) is the same fraction upside down: price divided by annual rent. That $250,000 property at $28,800 of rent is a GRM of 8.7 — the building costs 8.7 years of gross rent. Because they're reciprocals, every GRM maps to exactly one gross yield and vice versa: GRM 10 is a 10% yield, GRM 8.3 is 12%, GRM 20 is 5%. If you can divide, you can translate.
Cap rate is the odd one out — and the useful one. It divides net operating income by price: NOI is rent minus vacancy, property taxes, insurance, maintenance, management, and capital reserves — everything except the mortgage. Cap rate answers a question the other two can't: what does this building actually earn?
One more piece of vocabulary before the math: international listings (UK, Australia, much of Europe) quote net yield, which deducts operating expenses from rent before dividing by price. That makes net yield essentially the same number as cap rate under a different name. When anyone quotes you “a yield,” your first question is always gross or net? — because the gap between the two is typically 40-50% of the number.
All three on one duplex
Take a $250,000 duplex renting for $1,200 a side — $2,400/month, $28,800 a year. The screening metrics take five seconds:
- Gross yield: $28,800 ÷ $250,000 = 11.5%
- GRM: $250,000 ÷ $28,800 = 8.7
The cap rate takes an expense budget. Underwrite it line by line: 5% vacancy ($1,440), property taxes at 1.5% of value ($3,750), insurance ($1,600), 8% maintenance ($2,304), 8% management ($2,304), and 5% capital reserves ($1,440). Total operating expenses: $12,838, a 44.6% expense ratio. That leaves NOI of $28,800 − $12,838 = $15,962, and a cap rate of $15,962 ÷ $250,000 = 6.4%. (Run your own line items in the NOI calculator or go straight to the cap rate calculator.)
Same building, same day: an 11.5% quote, an 8.7 quote, and a 6.4% quote. None of them is wrong. They're measuring different depths of the same income stream — and the spread between the 11.5% and the 6.4% is the entire operating reality of the property.
The bridge formula
You can move between the gross quotes and the cap rate with one approximation:
Check it against the duplex: (1 − 0.446) × 11.5% = 6.4%. Exact. The 50% rule exists precisely because most long-term rentals land somewhere near a 50% expense ratio, which gives you the mental shortcut: cap rate ≈ half the gross yield. An 8% gross property is roughly a 4% cap. A 12% gross property (the 1% rule) is roughly a 6% cap. It's triage math, not underwriting — but it converts any listing quote into any other in your head.
| Monthly rent ÷ price | Gross yield | GRM | Cap @ 50% expenses | Cap @ 40% expenses |
|---|---|---|---|---|
| 0.50% | 6% | 16.7 | 3.0% | 3.6% |
| 0.67% | 8% | 12.5 | 4.0% | 4.8% |
| 0.83% | 10% | 10.0 | 5.0% | 6.0% |
| 1.00% | 12% | 8.3 | 6.0% | 7.2% |
| 1.17% | 14% | 7.1 | 7.0% | 8.4% |
| 2.00% | 24% | 4.2 | 12.0% | 14.4% |
Read across any row and you're looking at one property quoted four ways. The familiar screening rules fall out of the table: the 1% rule is the 12%-gross / 8.3-GRM row, and the near-extinct 2% rule is the bottom row. (Both rules are the same rent-to-price screen at different bars — the full comparison works that math.)
Where the gross quotes lie: the identical-twin trap
Here's the failure mode that makes gross yield dangerous as anything more than a screen. Take our $250,000 duplex and its identical twin one county over: same price, same $28,800 rent, same insurance, maintenance, management, vacancy. One difference — the twin sits in a high-tax jurisdiction paying $7,200 a year instead of $3,750.
| Metric | Duplex A · low-tax | Duplex B · high-tax |
|---|---|---|
| Gross yield | 11.5% | 11.5% |
| GRM | 8.7 | 8.7 |
| Property taxes | $3,750 | $7,200 |
| NOI | $15,962 | $12,512 |
| Cap rate | 6.4% | 5.0% |
Gross yield and GRM score these buildings as identical. The cap rate says Duplex B earns $3,450 a year less — a 22% haircut on NOI. Capitalize that shortfall at Duplex A's 6.4% rate and Duplex B is worth roughly $196,000, not $250,000: a $54,000 valuation gap that two “identical” gross yields cannot see. Taxes are the cleanest example, but the same trap hides in flood-zone insurance premiums, 40-year-old roofs that inflate the capex reserve, and self-managed listings whose pro formas omit management entirely.
So which metric should you use?
Screening a list: GRM or gross yield
When you're triaging forty listings, you have two numbers per property — price and asking rent — and that's exactly what the gross metrics consume. Divide, rank, and cut everything below your line (in most 2026 markets, leveraged deals stop penciling somewhere below 8-10% gross, i.e. GRM above 10-12). Whether you use GRM or gross yield is pure preference — they carry identical information. The GRM calculator runs either direction, and the GRM deep dive covers benchmarks by market type.
Underwriting and comparing: cap rate
The moment a property survives the screen, switch to cap rate. It's the first metric in the stack that reflects operating reality, the number appraisers and commercial lenders speak, and the only fair way to compare buildings across tax and insurance regimes — as the twin duplexes show. What counts as a good cap rate varies by market and asset class; our benchmarks post breaks down the 2026 ranges.
Deciding with a loan: neither
All three metrics in this post are unlevered — they don't know your mortgage exists. A 6.4% cap rate financed at 7% is negative leverage; the same cap rate financed at 5% cash flows. Once debt enters, you graduate to cash-on-cash return and DSCR, which is its own three-way comparison. The full ladder: gross metrics to shortlist, cap rate to underwrite the building, levered metrics to underwrite your deal on the building.
Three rules for reading quoted yields
First: always ask gross or net. A seller quoting “8% yield” on a turnkey listing is almost always quoting gross — which is roughly a 4% cap at normal expenses. If your buy box says “6%,” make sure both numbers live on the same side of the expense line before you conclude the deal clears it.
Second: distrust pro-forma NOI. A quoted cap rate is only as honest as the expense budget under it. Listing pro formas routinely assume 5% vacancy in a soft market, zero management, and maintenance numbers from a fresh renovation. Rebuild NOI from your own line items — it takes ten minutes and it's where the twin-duplex gap gets caught.
Third: never let a screen make a buy decision. Gross yield and GRM decide what's worth an hour of your time. Cap rate decides what the building earns. Whether you should buy it — at your rate, your down payment, your reserves — is a levered question the screening metrics were never built to answer.
FAQ
Is gross yield the same as cap rate?
No. Gross yield is annual rent divided by price and ignores every operating expense. Cap rate is net operating income divided by price — rent minus vacancy, taxes, insurance, maintenance, management, and reserves. On a typical rental running a 45-50% expense ratio, the cap rate is roughly half the gross yield: an 11.5% gross yield property might be a 6.4% cap rate deal.
How do I convert gross yield to cap rate?
Approximate it with: cap rate ≈ (1 − operating-expense ratio) × gross yield. At a 50% expense ratio, a 10% gross yield implies a 5% cap rate; at 40%, it implies 6%. This is a triage shortcut, not an underwrite — real expense ratios vary property to property, which is exactly why two identical gross yields can hide very different cap rates.
What is the relationship between GRM and gross yield?
They're reciprocals. GRM = price ÷ annual rent, and gross yield = annual rent ÷ price. A GRM of 10 is a 10% gross yield; a GRM of 8.3 is a 12% gross yield (the 1% rule); a GRM of 4.2 is a 24% gross yield (the 2% rule). Same measurement, flipped fraction.
What is a good gross yield on a rental property?
In 2026 US markets, roughly 8-12% gross is where leveraged deals start to pencil — that's a GRM of about 8-12, or 0.67-1% of price in monthly rent. Below 7% gross, a financed property almost never covers its mortgage and expenses. But 'good' depends entirely on the expense ratio underneath: a 10% gross yield with 6% property taxes can cash flow worse than an 8.5% gross yield in a low-tax county.
Does cap rate include the mortgage?
No. Cap rate is a property-level metric — NOI ÷ price — deliberately blind to financing so two buyers with different loans can compare the same building. Once debt enters the picture you need cash-on-cash return (levered cash flow ÷ cash invested) and DSCR (NOI ÷ annual debt service), which is a separate tier of metrics.
What's the difference between gross yield and net yield?
Net yield deducts operating expenses from rent before dividing by price — which makes it essentially the same number as cap rate. The gross/net yield vocabulary is more common in UK, Australian, and international listings; US investors usually say cap rate instead of net yield. When you see a yield quoted, always ask which one it is: the gap between gross and net is typically 40-50% of the number.