What is loss to lease? How can loss to lease on a property be a predictor of future value for the property?
Loss To Lease Opportunity
What is loss to lease?
Loss to lease is a term used to describe the difference between today’s market rate for a rental unit and the actual rent per the lease.
Why is this important to understand?
As an owner of a property, this figure will show you the opportunity to raise rents to market rates over the next 12 months as each unit renews. When you apply this potential increase in rent opportunity against an applicable cap rate, this will show you the potential value creation opportunity by bringing current lease rates to market rates.
Why do I share this story with you?
I share this because some people may not know what loss to lease represents and some people may not understand the opportunity to create additional value for the property by bringing current rents to market rents.
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