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What Is Loss to Lease, and How Do You Calculate It?

Every commercial investor should keep the loss-to-lease calculation in their back pocket.


[Updated: Apr 16, 2021 ] Jun 11, 2020 by Tara Mastroeni

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Calculation Actual Rent Market Rent
Gross potential income  $30,000 $30,000
Loss to lease $3,000 $0
Total rent $27,000 $30,000
Calculation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Gross potential income $30,000 $30,000 $30,000 $30,000 $30,000 $30,000
Loss to lease $3,000 $2,400 $1,800 $1,200 $600 $0
Total rent $27,000 $27,600 $28,200 $28,800 $29,400 $30,000
Calculation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Gross potential income $30,000 $30,000 $30,000 $30,000 $30,000 $30,000
Loss to lease $3,000 $2,400 $1,800 $1,200 $600 $0
Total rent $27,000 $27,600 $28,200 $28,800 $29,400 $30,000
Expenses $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
Net operating income  $21,000 $21,600 $22,200 $22,800 $23,400 $24,000
Cap rate 5.05% 5.05% 5.05% 5.05% 5.05% 5.05%
Property value $416,842 $427,723 $439,604 $451,485 $63,366 $475,248

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