Gross rent is rent before anything is taken away. The phrase is used in two common ways, and it helps to know which one someone means.
- For investors and owners, gross rent is the total rent a property brings in, or could bring in, before vacancy, operating expenses and debt.
- In housing programs and census data, gross rent is the rent in the lease plus the cost of utilities the tenant pays separately.
Gross rent for investors
Here gross rent is the top line of a property’s income. It comes in two flavors:
- Gross potential rent: what every unit would bring in at full rent for a full year, with no vacancy.
- Gross collected rent: what was actually collected.
Gross potential rent = Monthly rent for all units x 12
A hypothetical 6 unit building with units at $1,500 has gross potential rent of 6 x $1,500 x 12, or $108,000. If one unit sat empty for two months, gross collected rent would be $108,000 minus $3,000, or $105,000.
Gross rent feeds quick screening measures like the gross rent multiplier (price divided by gross annual rent). It is a starting point only. A property’s real earning power shows up in net operating income, after vacancy and operating costs.
Gross rent in housing programs
The U.S. Department of Housing and Urban Development and the Census Bureau use gross rent to compare housing costs on equal terms.
Gross rent = Contract rent + Tenant paid utilities
In voucher programs, the tenant paid utility amount is usually a utility allowance set by the local housing authority rather than the actual bill. A unit with a contract rent of $1,350 and a $150 utility allowance has a gross rent of $1,500. That number is compared with the program’s payment standard to work out what the housing authority pays and what the household pays.
Gross rent vs net rent
| Term | What it means |
|---|---|
| Gross rent (investor) | Rent before vacancy and expenses |
| Gross rent (housing programs) | Contract rent plus tenant paid utilities |
| Net rent | Rent after certain costs, or base rent under a net lease |
| Effective rent | Average rent after concessions |
Why it matters for landlords
Gross rent is easy to quote and easy to overstate. When comparing properties, ask whether a seller’s figure is potential or collected rent, and over what period. If you rent to voucher holders, understand how utilities affect the gross rent the housing authority will approve. TenantLoop’s rent roll and profit and loss come from the ledger, so you can see scheduled rent, collected rent and the difference without building a spreadsheet; affordable housing owners can also track the tenant and housing authority shares separately.
Related terms
Related questions.
Is gross rent the same as gross income?
Close, but not quite. Gross rent counts rent only. Gross income for a property usually adds other income such as parking, laundry and fees.
Why do housing programs add utilities to rent?
So that units are compared on what the household actually pays to live there. A $1,200 unit with utilities included and a $1,050 unit where the tenant pays $150 in utilities cost the household the same.
Does gross rent include late fees?
Usually not. Late fees, application fees and similar charges are counted as other income rather than rent.