To arrive at Net Potential Rent, which items are subtracted from Gross Potential Rent?

• A. Loss to Lease and Concessions
• B. Vacancy
• C. Operating Expenses
• D. Property Taxes

Answer: (A)

Net Potential Rent measures what the property would rent for if every unit were leased at market rent, before considering any other deductions. To get NPR from Gross Potential Rent you subtract the portion that is lost because current leases are below market or because concessions are being given—these are the Loss to Lease and Concessions.

Vacancy would reduce actual cash flow beyond NPR and is handled later when moving from NPR to Effective Gross Income, so it isn’t subtracted to arrive at NPR. Operating expenses and property taxes are costs, not reductions in rent, so they affect net income (like NOI) after rent is determined, not the amount of Net Potential Rent itself.

For example, if Gross Potential Rent is 1,000,000 and Loss to Lease and Concessions total 80,000, Net Potential Rent would be 920,000. Vacancy and other costs come into play in subsequent steps.