Loss to Lease

Loss to lease is the difference between what a unit rents for today (in-place rent) and what it could rent for at market. A positive loss to lease means the in-place rents sit below market — rent you're not yet collecting, but could.

How it's used: in value-add multifamily it's the headline upside metric. Underwriters measure in-place vs. market across the rent roll to size how much rent can be captured as leases roll over, which is the bridge from today's NOI to a stabilized NOI. It shows up as the gap between gross potential rent at in-place vs. market rents.

Why it matters: capturing loss to lease is the cheapest form of value creation — you raise rents to market at natural turnover, often with little capital. But the thesis depends entirely on the market rent being real: an aspirational market rent manufactures upside that never arrives. Verify it against true, leased comparables, not the broker's target.

Formula: Loss to lease = (Market rent − In-place rent) × units (annualized)

The multifamily proforma calculator and the multifamily underwriting guide show how the rent gap flows into collected income.