Gross Potential IncomeGross potential income: the ceiling on what a building can earn.

What gross potential income means

Gross potential income, also called gross potential rent or GPR and sometimes gross scheduled income, is the starting line of every apartment operating statement. It assumes full occupancy, full market rent and no discounts.

No building actually collects it. Its value is as a fixed yardstick: every dollar lost to vacancy, discounts or unpaid rent is measured against it.

The gross potential income formula

Gross potential income = sum of market rent for every unit x 12 months

Use market rent for each unit, whether it is occupied or not. Some owners use the rent in place for occupied units instead; whichever you choose, say so, because it changes how the gap below is read.

A worked gross potential income example

Illustrative figures, not from a real property

A 40-unit building has 20 one-bedrooms at a market rent of $1,400 and 20 two-bedrooms at $1,600. Monthly potential rent is $28,000 plus $32,000, or $60,000. Gross potential income is $720,000 a year.

That year, vacancy costs $30,000, rent concessions $8,000, loss to lease $12,000 and unpaid rent $5,000. Rent collected is $665,000.

Using gross potential income to find lost rent

Comparing collected rent to gross potential income shows how well a property captures its potential. In the example, $665,000 / $720,000 is about 92 percent, which is the building's economic occupancy.

Breaking the gap into its parts tells you where to act: pricing, leasing speed, discounts or collections. Our longer guide to understanding gross potential rent covers the industry conventions.

Gross potential income and other income

Lenders and buyers treat other income, such as fees, parking, storage and utility billing, as its own line, so it does not blur how well the units themselves are leased. Quick screens such as the gross rent multiplier use gross rent too, so check whether a listing's figure is potential or collected before you compare.