The IRS defines rental income as any payment received for using or occupying property. [1] This solely represents rent paid by residents or tenants, while ancillary income comprises several revenue streams. Investors use metrics like GPR and EGI to predict an investment’s income, returns, expenditures, and overall profitability. 

Multifamily properties, such as apartment buildings, generate income primarily through rent. Rent is meant to provide a consistent cash flow to the property owner and is typically the predominant source of revenue for rental properties. [2] This article will highlight how properties generate and preserve income and define key real estate terminology, such as gross potential rent (GPR), potential gross income (PGI), effective gross income (EGI), rent roll, and resident retention.

GPR & EGI

Gross potential rent (GPR) is a standard metric to determine the maximum rental income a property could earn if all units were rented at market value. [3] The operative word here is “potential,” meaning that this amount constitutes the maximum rental income a property can expect to generate. It is significant to note that GPR does not include other ancillary income, nor does it account for market volatility and real-work factors such as market fluctuations, resident defaults, or property condition, and any of the factors used to determine GPR at acquisition could become inaccurate or change over time. [3] Therefore, you cannot rely on the metric’s present outcome to determine future income, as it is most commonly used for benchmarking and investment analysis.

(Number of Rentable Units) x (Annualized Market Rent per Unit) = GPR. [4]

Potential Gross Income (PGI) is the maximum possible income a property could generate if all units are occupied at market rent and all ancillary income sources are fully utilized and collected. PGI = Gross Potential Rent (GPR) + Ancillary income. In other words, PGI calculations consider total rental income plus parking fees, valet trash, or other income-generating sources in the property. They are an essential component in determining effective gross income (EGI).

Effective Gross Income (EGI) refers to a property’s total income after accounting for vacancies and credit losses but before deducting operating expenses. [1][5] Measuring EGI is essential as it can provide a realistic projection of a property’s revenue potential and play a pivotal role in your overall investment strategy. 

Potential Gross Income (PGI) – Vacancy & Credit Losses = EGI. [5]

RENT ROLL ANALYSIS 

A rent roll for multifamily apartment communities is a ledger containing each unit and the resident’s rental information—i.e., lease start and end dates, monthly rent, security deposits, and payment status. This collection of residents’ financial information is used to better understand current and future cash flows and can help operators know if the property is performing according to their projections. [6] You can think of this document or collection of documents as an itemized report of each unit in the apartment building. [6] Below is a sample entry from a fictitious property’s rent roll: [6]

Rent rolls offer a preview for buyers/investors as to the gross cash flow a property generates. Rent rolls help determine resident stability, distinguishing ideal residents from difficult ones. Do they pay the agreed-upon rent on time? How long have they been a resident? Are current rents below market? How many leases are due to expire? A rent roll can provide insights into a property’s income history, current performance, and future revenue potential. [6]

RESIDENT RETENTION & TURNOVER

Resident retention rates measure the number of occupied units that do not turn over (lease is renewed) in a given year. In other words, it reflects how many residents choose to stay rather than move out. [7] So, if Property X has 200 units occupied and 100 of those units’ residents turn over (do not renew their lease), but 100 units remain occupied, that is a turnover rate of 50% and a retention rate of 50%.

Resident retention balances the need for higher rent and occupancy. While turning over more units may allow operators to raise rents to meet or exceed market rates, resident turnover comes with actual costs like vacancy loss, cleaning, repairs, marketing, and leasing commissions. At the same time, those costs are sometimes worth it if new leases materially increase income. This is where knowing the market and how to strike the right balance comes into play. Market research shows that resident satisfaction, quality maintenance, community safety, and moderate rent increases can help minimize resident churn. [8] Amenities can significantly impact occupancy rates. Attractive amenities that enhance residents’ living experience may justify a slightly higher rent. [8]

WORK WITH BAM CAPITAL FOR MULTIFAMILY REAL ESTATE INVESTING

Being the general partner in a multifamily real estate deal requires significant time, energy, and resources. If you’re an accredited investor who wants passive income, consider working with an established sponsor with a proven track record to arrange your deals.

BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.

Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

© 2025 Bam Capital. All rights reserved.

SOURCES:

[1]: Internal Revenue Service (IRS). (n.d.). “Rental income and expenses – Real estate tax tips.” https://www.irs.gov/businesses/small-businesses-self-employed/rental-income-and-expenses-real-estate-tax-tips#:~:text=Rental%20income%20is%20any%20payment,the%20year%20you%20pay%20them. 

[2]: Google Generative AI. (2025). “How do multifamily properties generate income?” https://www.google.com/search?q=HOW+DO+MULTIFAMILY+PROPERTIES+GENERATE+INCOME

[3]: COMMLOAN. (2023). “Understanding Gross Potential Rent.” https://www.commloan.com/research/gross-potential-rent/#:~:text=Gross%20potential%20rent%20is%20a,nor%20can%20it%20be%20expected. 

[4]: WallStreetPrep. (2024). “Gross Potential Rent (GPR).” https://www.wallstreetprep.com/knowledge/gross-potential-rent-gpr/

[5]: WallStreetPrep. (2024). “Effective Gross Income (EGI).” https://www.wallstreetprep.com/knowledge/effective-gross-income-egi/#:~:text=The%20Effective%20Gross%20Income%20(EGI,the%20primary%20source%20of%20returns.

[6]: Stessa. (2025). “What is a Rent Roll (Plus a Free Rent Roll Template).” https://www.stessa.com/blog/rent-roll/

[7]: TheGuarantors. (2024). “How to boost your resident retention — and your bottom line.” https://www.theguarantors.com/blog/owners-and-operators/boost-resident-retention-and-your-bottom-line-proven-tips

[8]: Google Generative AI. (2025). “Resident turnover balancing act between higher rent and occupancy.” https://www.google.com/search?q=resident+turnover+balancing+act+between+higher+rent+and+occupancy