The direct answer
Lease-up costs are the cash and revenue sacrifices required to move a vacant unit or space into a paying lease. They can include marketing, make-ready work, leasing commissions or fees, concessions, screening and administrative costs, plus the opportunity cost of vacancy during the lease-up period.
Separate direct cash costs from lost revenue
Marketing, repairs and leasing fees are direct expenditures. Vacancy and free-rent concessions reduce revenue rather than appearing as the same type of invoice, but they still affect the economics of the lease-up.
To apply the approach to an editable scenario, use the Net Effective Rent Calculator. For the neighboring question, explore Property Management Fees Calculator.
Distinguish make-ready from capital improvement
Cleaning, paint and minor turnover repairs can differ economically from major renovations that extend useful life or reposition the property. Keep the categories separate for underwriting and tax review.
Evaluate cost relative to expected lease value
A larger concession can make sense if it materially reduces downtime or secures a stronger lease. Compare the total lease-up package with expected rent, lease term and renewal probability rather than evaluating each item in isolation.
Worked example
A vacant unit may require $1,500 of make-ready work, $600 of marketing and leasing costs, and one free month on a $2,000 lease. Before counting additional vacancy days, the lease-up burden is already $4,100.
Open Net Effective Rent Calculator and test your assumptions →
Common mistakes and limitations
Do not model lease-up cost as only the repair invoice. Concessions, commissions and lost rent can be as important as physical make-ready work.
Does not determine lease legality, fees outside modeled concessions or renewal economics.
Frequently asked questions
Does vacancy count as a lease-up cost?
It is usually best modeled as lost revenue during lease-up rather than as a direct cash expense, but it still affects the decision.
Should concessions be included in lease-up economics?
Yes. Free rent or reduced rent lowers effective revenue and should be included when comparing lease-up strategies.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- IRS — Publication 527 (2025), Residential Rental PropertyRental income and expense concepts; operating/rental expense context.
- Office of the Comptroller of the Currency — Comptroller's Handbook — Commercial Real Estate LendingNOI, direct capitalization, cap-rate valuation and DCF concepts for commercial real estate.
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