Gross potential rent vs actual rent: loss to lease, vacancy and concessions

Start with GPR

GPR prices every unit, occupied or empty, at market rent. It therefore depends on whoever supplies the market figure: the roll's market rent column, an appraiser or a broker. It is a benchmark, not a collected number.

Then take the losses in order

Loss to lease is market rent minus in-place rent on occupied units: tenants paying less than market. Vacancy loss is the market rent of units with nobody in them. Concessions are free rent or discounts given to win or keep a tenant. Credit loss is rent billed and not collected.

What is left

After loss to lease and vacancy, what remains is in-place rent: the sum of what occupied units pay under their leases. That is the figure a rent roll states, and the one its printed total should match. Definitions vary, and some underwriters build GPR on in-place rent for occupied units, which puts loss to lease inside the rent figure. State your convention.

The example in numbers

In the table below, 24 units at market give $39,600 a month of potential rent. Two empty two-bedrooms take out $3,700, tenants paying under market take out $1,080, and in-place rent is $34,820. Concessions and credit loss then bring collected rent to $34,170.

1. Get market rent for every unit

   Use the roll's market rent column if it has one, or an appraisal or broker opinion. Record the source.

2. Add up GPR

   Sum market rent across all units, vacant ones included.

3. Compute vacancy and loss to lease

   Vacancy is the market rent of the vacant units. Loss to lease is market minus in-place rent on the occupied ones.

4. Check in-place rent against the roll

   GPR less those two losses should equal the sum of the occupied units' rents. If it does not, a unit is mistyped or the market column is incomplete.

5. Deduct concessions and credit loss

   Take concessions from the roll's notes or the leases, and credit loss from the ledger. The result is collected rent.

Invented monthly figures for the 24-unit building used across these guides.

As shares of GPR: loss to lease 2.7%, vacancy 9.3%, concessions 0.8%, credit loss 0.9%.

Using asking rent as market rent

Asking rents are what owners hope for. Rents on recently signed leases are better evidence.

Merging loss to lease with vacancy

One is below-market rent on occupied units and the other is empty units. Merging them hides which problem you have.

Treating GPR as income

GPR is a ceiling. A property collects all of it only if every unit is leased at market rent and every tenant pays, so a figure labeled potential should not reach a cash flow unreduced.

Forgetting that concessions move

One month free on a twelve-month lease costs a twelfth of annual rent in the first year and nothing after. Say whether the model shows the first-year cost or an average.

Mixing definitions across documents

An appraisal, a lender and a seller may each define GPR differently. Compare like with like.

RentRoll Engine gives you the in-place line. It reads a rent roll PDF to a CSV, checks the summed rent and area against the printed totals and reports occupancy by unit and by area. Market rent is left out of the CSV and named as unused, so take it from the PDF. Free: 1 file per day, up to 10 pages, no account. Files over 10 pages are converted up to page 10 on the free allowance; a page code converts the whole file, up to 150 pages. See pricing.

• Physical vs economic vacancy. Empty units against rent not collected, and how to compute each from the roll.
• NOI from a rent roll. Gross potential rent to effective gross income to NOI, with a worked table.
• Rent roll vs T-12. A snapshot of leases set against twelve months of cash.

All twelve guides