The direct answer
Loss to lease is the gap between supportable market rent and the in-place contractual rent on occupied units. A simple dollar calculation is market rent minus contract rent for comparable units, but the metric should be separated from vacancy, concessions and bad debt because each represents a different source of income loss.
Define the market-rent benchmark carefully
Market rent should be supported by current comparable leases, asking rents adjusted for concessions, or another documented market source. An optimistic target rent will exaggerate loss to lease.
To apply the approach to an editable scenario, use the Rent Estimate Calculator. For the neighboring question, explore Rental Property Calculator.
Keep other revenue losses separate
A vacant unit is not the same as loss to lease on an occupied unit. Delinquency and concessions also have different causes and underwriting implications, so report them independently before combining them in effective gross income.
Use the metric for mark-to-market analysis
Loss to lease can indicate potential rent growth as leases renew, but realizing that upside can require time, turnover, capital work or tenant acceptance. Model lease expirations and renewal assumptions instead of assuming immediate repricing.
Worked example
If ten occupied units could support $2,000 monthly market rent but average $1,850 in-place, simplified loss to lease is $150 per unit, or $1,500 per month. That amount is potential mark-to-market gap, not guaranteed next-month revenue.
Common mistakes and limitations
Do not count vacant units, unpaid rent and free-rent concessions as loss to lease unless your reporting convention explicitly defines them that way.
Uses user-entered comparable data. It does not access MLS or live rental databases and is not an appraisal.
Frequently asked questions
Is loss to lease the same as vacancy?
No. Loss to lease usually compares market and contract rent on occupied units, while vacancy reflects unoccupied space.
Does loss to lease always mean rents should be raised immediately?
No. Lease terms, renewal risk, regulation, market demand and unit condition can limit how quickly the gap can be captured.
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.
- 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.
- Appraisal Institute — Basic Formulas — Income CapitalizationIncome/cap-rate/value relationships, gross income multiplier and debt-coverage formula references.
Read our editorial policy for the scope of these educational methods.