Loss to lease
The gap between what a unit could rent for at current market rate and what it's actually renting for under existing leases. Big loss to lease means room to raise rents as leases turn.
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Where this comes up: getting ready
Part 1 of 4
Why a seller cares
Loss to lease is the rent you are not collecting because your tenants pay below market. To a buyer it is upside; to a seller it is a reason the building is worth more to the right buyer than its current income suggests.
Part 2 of 4
A simple example
Your fourplex's units rent for $950 where market is $1,150. That is $9,600 a year of loss to lease.
| How a buyer reads it | What it does to the offer |
|---|---|
| Upside they can capture as leases turn | Willing to pay more than current income supports |
| Rent-controlled units that cannot be raised | No upside; priced on current rent |
| Long-term tenants who will leave if raised | Upside with turnover cost attached |
Loss to lease is income waiting in the leases. Buyers pay for some of it, not all.
Part 3 of 4
What people get wrong
That below-market rent lowers the price outright. It lowers the current income and raises the upside, and buyers price both.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines loss to lease in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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