Mark to Market
Also called: Marking rents to market, Rent burn-down
Marking to market is the process of raising in-place rents to prevailing market levels as leases expire, converting loss to lease into collected income over the natural turnover cycle.
Mark to market is the mechanism by which loss to lease becomes real money. Because leases expire on a staggered schedule, the capture is gradual, and modeling it correctly means burning the gap down over the lease roll rather than stepping income up on day one.
The pace is governed by turnover rate and renewal behavior. At a typical 45% to 55% annual turnover, roughly half the gap is addressable each year, so a full capture usually takes eighteen to twenty-four months even when the market rent estimate is correct.
Related terms
- Loss to Lease
Loss to lease is the difference between a property's market rent and the actual in-place rent on its current leases, representing income the property is contractually unable to collect until those leases roll.
- Value-Add
Value-add is an investment strategy that acquires a property with identifiable operational or physical upside and invests capital to raise its net operating income, increasing value beyond market appreciation.
- Rent Roll
A rent roll is a unit-by-unit schedule of a property's leases showing unit type, square footage, current rent, market rent, lease start and expiration dates, and occupancy status.