What is loss to lease, and how do you calculate it from your rent roll?
Loss to lease is the market rent for your units minus the rent your tenants actually pay. If four units could rent for $4,750 a month and their leases total $4,350, you lose $400 a month, 8.4% of market rent. The number tells you how far below market you are, but not that you should raise rent.
The calculation, unit by unit
For every occupied unit, subtract the rent in the lease from the market rent for a unit like it. Add the differences. Divide by the total market rent to get a percent.
| Unit | Lease rent | Market rent | Loss to lease |
|---|---|---|---|
| 1 | $1,000 | $1,150 | $150 |
| 2 | $1,050 | $1,150 | $100 |
| 3 | $1,100 | $1,200 | $100 |
| 4 | $1,200 | $1,250 | $50 |
| Total | $4,350 | $4,750 | $400 |
Example made-up numbers. Loss to lease is $400 a month, $4,800 a year. As a share of market rent, $400 divided by $4,750 is 8.4%.
Gain to lease is the opposite: a tenant paying more than the market rent. Net the two if you want one figure for the building.
Where the market rent comes from
The whole calculation depends on the market number, and it is an estimate. Use recent asking and signed rents for comparable units nearby, matched on size, condition, floor and what is included. How to price a rental listing shows how to gather them.
- Use one market rent per unit type, not a different guess for each unit.
- Update it at least once a year, and again when a nearby building opens or closes.
- Write down where each number came from, so next year you can see what changed.
Do not use your own asking rent on a vacant unit as the market, unless it has been rented at that price. A listing that sits for months tells you the market is lower.
What to do about it
Loss to lease is information, not an instruction. Several things limit how fast you can close the gap.
- The lease. A fixed term lets you change rent only at renewal in most places. Check your lease and state law for any exceptions.
- The law. Some states and cities cap increases or require specific notice. Check rent increase notice requirements, and your city's rules on top.
- Turnover cost. A tenant who leaves over a big increase costs you vacancy, cleaning and re-letting, and a good tenant paying slightly under market can be worth keeping.
Example with the made-up units above, move unit 1 up by $75 instead of $150. You close $75 of the $150 gap, collect $900 more over a year, and keep a tenant who pays on time. Whether that is right depends on your market and the tenant.
For a method to choose the size of an increase, read how much to raise rent fairly.
Tracking it over time
Recalculate when leases renew, not only once a year. Loss to lease should fall as renewals reset rents, and rise again if you stop adjusting while the market moves. A figure that keeps growing means you are giving up income without a reason.
Report it with the rest of the numbers that describe a building, such as economic occupancy and delinquency. IRS Publication 527 is clear that rent you collect is income in the year you receive it, which is why the rent roll's actual rents, not the market guess, are what reach your books.
How DoorKeeping handles it
Ask Claude or ChatGPT through DoorKeeping for the rent roll, which lists each tenant's current rent and lease dates. Give the assistant your market rent for each unit type and it can build the table above and list the leases ending soonest. Drafting a renewal or an increase notice is something the assistant can prepare, and you approve it before anything goes to a tenant. DoorKeeping does not set market rents.
Sources
- IRS, Publication 527, Residential Rental Property (rental income), read Oct 30, 2026
Questions
- What is loss to lease?
- It is the difference between what units could rent for at market and what the current leases charge.
- Is loss to lease bad?
- Not always. It shows room to adjust rent, but a long-term tenant who pays on time may be worth more than a few extra dollars.
- How is loss to lease different from vacancy loss?
- Vacancy loss is rent missed on empty units. Loss to lease is rent missed on occupied units priced below market.
- Can I raise rent to market right away?
- Only if the lease and your state or city rules allow it. Check notice rules and any caps first.