Gross Potential Rent (GPR)

Gross Potential Rent (GPR) can be defined as the overall amount of income that a real estate investor will expect to collect from the purchased property based on the current market rent. In order to determine the Gross Potential Rent, an investor will make the assumption that each of the units are occupied and the tenants make payments for rent. Another way of defining Gross Potential Rent is determining the possible rental revenue in a residential property assuming that an existing rent is already in place, including the market rent value of any unit that is vacant. When an investor makes the decision to purchase a residential or commercial property, they pay what we consider a flat purchase price. In determining the Gross Potential Rent, investors are able to better predict the profitability of that particular piece of property. This is the first piece of information needed in making this determination. In order to calculate the GPR, one must first analyze the market rent by asking brokers or real estate agents how much rent is paid on similar units. Once we are able to determine this price, we can then proceed to calculating the GPR by simply multiplying the market rent by the number of units. For example, if rent is $700 monthly and there are 20 units, the equation would look something like this; 700 x 20,which would equal $14,000 per month and (700 x 20 x 12) $168,000 yearly.