Demystifying Market Rents: Everything You Need to Know

What is it:

Market rent is the rental amount that is advertised today. This market rent multiplied by the total number of units is your gross potential rent; your top line number.

People mistakenly see the term "Market" and think that this is the rental amount that comparable properties suggest. Instead, market rent is determined by the owner and the property manager. It doesn't have anything to do with the average of comparable property rental amounts.

Example:

There are 100 units on the property total.

The unit mix has 50 units 1 bedroom and 50 units 2 bedroom.

The asking rent on the 1 bedroom units is $1,000. The asking rent on the 2 bedroom units is $1,200.

50 x $1,000 x 12 months = $600,000

50 x $1,200 x 12 months = $720,000

$600,000 + $720,000 = $1,320,000

$1,320,000 is your total "Market Rent." The term "Gross Potential Rent" is an interchangable term for the same thing.