Gross Potential Rent (GPR) in commercial real estate is the maximum amount of rent money an owner or investor can expect to make from a property during a specific time period. It is calculated by adding together the market rent of every unit in a project. Market rent is the average amount of rent that tenants pay for similar properties in the same geographic area.

For example, a property with 15 units, each with a market rent of $4,000 a month, has a monthly GPR of $60,000. In order to determine market rent, an investor should look at similar properties in the same area for an accurate estimate. By doing this, the investor gets a good idea of a property’s profitability before they decide to purchase it.

In addition to GPR and rent roll, investors may also want to look a projects Trailing Twelve Months (TTM) and Trailing Three Months (T3) financial numbers in order to determine its profitability.

GPR, or gross potential rent, is the maximum amount of rent money an owner or investor can expect to make from a property during a specific time period. It is calculated by adding together the market rent of every unit in a project. For example, a property with 15 units, each with a market rent of $4,000 a month, has a monthly GPR of $60,000. In order to determine market rent, an investor should look at similar properties in the same area for an accurate estimate. By doing this, the investor gets a good idea of a property’s profitability before they decide to purchase it.

Gross potential rent is often equated with gross potential income (GPI), which, in practice, is often the same, but sometimes incorporates potential income from parking spaces, vending machines, and other ancillary income sources. Another related term, effective gross income (EGI), is calculated by taking a property’s gross potential income, and subtracting all physical and economic vacancies.

GPR in commercial real estate is affected by the market rent of each unit in a project. Market rent is determined by looking at similar properties in the same area. In addition to GPR, investors may also want to look at a project's TTM (trailing twelve months) and T3 (trailing three months) financial numbers in order to determine its profitability.

Sources:

• GPR: Gross Potential Rent in Commercial Real Estate
• Rent Roll
• T3: Trailing Three Months
• TTM: Trailing Twelve Months

Understanding GPR in commercial real estate can be beneficial for investors in a number of ways. It can help them get an accurate estimate of a property's profitability before they decide to purchase it. GPR also provides investors with a better understanding of a property's potential income, as it assumes 100% occupancy. Additionally, GPR can be used in conjunction with rent roll, TTM, and T3 financial numbers to get a more comprehensive view of a property's profitability.

GPR can help small business owners secure financing for commercial real estate by providing lenders with an accurate estimate of a property’s profitability. By looking at a property’s GPR, rent roll, TTM, and T3 financial numbers, lenders can get a better understanding of the potential return on investment for a property. This information can help lenders make more informed decisions when considering loan applications from small business owners.

For more information on GPR and other commercial real estate terms, please visit www.commercialrealestate.loans/commercial-real-estate-glossary/.