Market vs Contract Rent Calculator

Contract rent is what the tenant pays today; market rent is what a new tenant would pay. The gap is loss-to-lease (if below market) or mark-to-market opportunity.

Contract monthly rent

Market monthly rent

Units

Cap rate

Value gap at cap rate

$5,000,000

Gap per unit (monthly)

$250

Annual rent gap (portfolio)

$300,000

Gap as % of market

12.20%

How the math works

Market − contract rent = loss-to-lease (or above-market premium, if negative). It's the mark-to-market opportunity on acquisition.

Value-add sponsors buy property at market cap on contract rent, renovate + push rents to market, and capture the value gap. It's the single biggest source of alpha in multifamily value-add.

How to Use

Enter monthly contract rent.
Enter monthly market rent.
Enter unit count.
Read gap, annual impact, and value impact at cap.

Frequently Asked Questions

Why gap exists?

Long-term tenants, renewal discounts, or recent market moves. Multifamily with 2-year leases often carries 3-8% loss-to-lease in up markets.

How do you close the gap?

At renewal — raise to market. At turnover — new lease at market. Some rent-controlled markets cap increases, slowing the close.

Above-market rent?

Happens with long NNN leases with escalators in declining markets. Tenants may renegotiate or default. Underwriters heavily discount above-market rent in valuation.

What documentation matters here?

Written leases, move-in/move-out inspections with photographs, ledger entries showing every payment and charge, served notices with proof of service, and contemporaneous emails or texts. Courts weigh written evidence heavily; informal understandings rarely stand. Institutional operators run a monthly file audit to catch gaps before they matter. Good paper trails recover most of what's owed.