Gross potential rent (GPR) is the rent a property would collect in a year if every unit or suite were leased and every tenant paid in full. It’s the top line of a real estate income statement, before any deduction for vacancy, concessions or bad debt.
Formula
For apartments: GPR = Number of units × Monthly rent per unit × 12
For commercial space: GPR = Rentable square feet × Annual rent per square foot
Worked example
A 120-unit apartment property has an average in-place rent of $1,500 a month.
GPR = 120 × $1,500 × 12 = $2,160,000
That’s the figure at the top of the property’s T12. Subtract 6% for vacancy and credit loss ($129,600), add $96,000 of other income such as parking and laundry, and you get an effective gross income of $2,126,400.
Now suppose the broker says market rent for the same units is $1,650 a month. At market rent, GPR is 120 × $1,650 × 12 = $2,376,000. The $216,000 difference between the two figures is the loss to lease.
What it means in practice
Before you rely on a GPR figure, check which rents it uses. Some owners and brokers state GPR at in-place rents. Others state it at market rents and then subtract loss to lease on the next line. Both are standard, but you can’t compare one deal stated at in-place rents with another stated at market rents. In the example above, the market-rent version shows a GPR 10% higher for the same building.
GPR also doesn’t tell you how much rent the property actually collects. Two buildings can have the same GPR at 95% occupancy and at 80%. To see what’s really coming in, look at the vacancy, concession and bad debt lines below GPR, and at the economic occupancy they produce. Our guide on how to read a T12 walks through each of those lines using the same 120-unit example.
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Frequently asked questions
What is the difference between gross potential rent and effective gross income?
GPR is the rent at full occupancy with every tenant paying. Effective gross income (EGI) is what the property actually brings in: GPR minus vacancy, concessions and bad debt, plus other income. In the example above, GPR is $2,160,000 and EGI is $2,126,400.
Does gross potential rent include other income?
No. GPR covers rent only. Parking, laundry, pet fees, storage and utility reimbursements go on a separate “other income” line, which is added after vacancy is deducted.
Is gross potential rent the same as potential gross income?
Not quite, though the terms are often used interchangeably. Potential gross income usually means GPR plus other income at full occupancy. Check the line items rather than relying on the label.