The direct answer
In-place rent is the rent currently contracted, market rent is the rent supportable for a comparable lease in the current market, and renewal rent is the amount you expect an existing tenant to accept at renewal. A realistic rent-growth model keeps these three concepts separate instead of assuming every lease instantly resets to market.
Use in-place rent for current contractual cash flow
Existing lease terms determine current scheduled rent until the lease changes. Market growth does not automatically change the cash flow of a fixed lease.
To apply the approach to an editable scenario, use the Rent Increase Calculator. For the neighboring question, explore Rent Estimate Calculator.
Support market rent with evidence
Use recent comparable leases or other credible market evidence and adjust for unit quality, concessions, utilities and lease terms. Asking rent alone can overstate achievable effective rent.
Model renewal rent as a behavioral outcome
Renewal rent can be below, at or above market depending on retention strategy, regulation and tenant economics. Link the assumption to renewal probability and turnover cost rather than forcing every renewal to market.
Worked example
A unit may have $1,900 in-place rent, $2,100 supportable market rent and a modeled $2,025 renewal offer. The underwriting should not assume the full $200 mark-to-market gap is captured immediately if the existing lease has months remaining.
Common mistakes and limitations
Do not apply one annual rent-growth percentage to every unit regardless of lease expiration and renewal timing.
Pure arithmetic. It does not determine whether a rent increase is legally permitted in a specific jurisdiction.
Frequently asked questions
What is the difference between market rent and renewal rent?
Market rent is an external market estimate, while renewal rent is the specific rent expected or offered to an existing tenant.
Should underwriting mark every unit to market immediately?
No. Existing lease terms, expiration dates and renewal assumptions determine when rent can actually change.
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.
Read our editorial policy for the scope of these educational methods.