Rent Growth Premium Calculator

Many underwrites assume above-market rent growth. This calculator sizes the premium so LPs can challenge it.

Projected rent growth %

Market average growth %

Years projected

Starting annual rent

Premium (bps/yr)

150

Year-N projected rent

$1,495,418

Year-N market rent

$1,391,129

How the math works

Premium = projected − market growth, in bps. End rents compound independently.

Over 5 years, even a 150bps premium can inflate pro forma rent by 8%. Build reversion value as if growth reverts to market average; anything else is optimism baked into equity return.

How to Use

Enter projected rent growth %.
Enter market average growth %.
Enter years projected.
Read premium and cumulative divergence.

Frequently Asked Questions

Typical market?

3-3.5% long-run U.S. multifamily. 2-2.5% commercial. Hot markets 4-5% briefly. Any pro forma exceeding 4% needs a real justification beyond 'trend continues'.

Red flags?

5%+ rent growth across all years. Rent premium vs comps >15%. No decay in year 3+. Each is a flag; combined is a common overpromise.

Realistic sensitivity?

Always stress test at market-average growth or 100bps below pro forma. If IRR still clears hurdle, deal is defensible. If only pencils at pro forma, walk.

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.