GROSS POTENTIAL INCOME AND RENT ROLLS
- Cash flow is not just money in movement. It involves planning and a bit of calculation. The first step in computing cash flow is determining the gross potential income. Gross potential income (GPI) is the maximum market rent that can be derived from 100% collection of rents over the course of a financial period (normally, a year).
- A rent roll is a tool used to identify sources of income. It provides a good picture of a property’s GPI. In a resident property, a rent rolls is a listing of each rental unit described by size and type, rental rates and others payments received.
- Loss to lease is the amount of money lost due ro rents being less than the maximum market rents, or GPI.
- For example, consider an apartment building that has 10 leases. In 2013 they all rented at $750. At the start of the 2014, the market rent (GPI) rose to $1000. However, only six of the leases were up for renewal at the start of 2014. Those six rental for $1000. The order four under the old lease continued to rent at $750. As a result, the loss to lease comes out to $250 per month for each of these four leases.