Which of the following are subtracted from Potential Base Rent (PBR) to calculate Total Rental Income?

• A. Rent Abatements and Absorption & Turnover Vacancy
• B. Mortgage Payments
• C. Property Taxes
• D. Insurance

Answer: (A)

The key idea here is that Potential Base Rent represents the rent you would collect if every space were fully leased and paying full price. To get the actual rental revenue you expect to receive, you must subtract the reductions that occur when spaces are not generating rent at full level. Rent abatements remove rent for negotiated free or reduced rent periods, and absorption and turnover vacancy account for the time spaces are empty during tenant changes. Subtracting these from the potential base rent yields the total rental income you can expect.

Mortgage payments, property taxes, and insurance are not subtracted from Potential Base Rent to compute total rental income. Those are financing costs and operating expenses that affect cash flow and profitability (NOI or after-tax cash flow), but they are not part of the rental revenue figure itself.