Rent Comparables
Also called: Rent comps, Comps, Comparables
Rent comparables are recently leased units at competing properties used to establish the market rent a subject property can achieve, adjusted for differences in size, condition, amenities, and location.
Rent comps are the evidentiary basis for every rent assumption in a model. Because loss to lease and the entire value-add thesis rest on the market rent estimate, weak comps invalidate the underwriting downstream of them regardless of how carefully the rest is built.
Good comp selection means matching vintage, unit size, and amenity level, and using recently signed leases rather than asking rents. Asking rents overstate achieved rents whenever concessions are in the market, which is exactly when the distinction matters most.
Rules of thumb
- Use at least three to five comps per unit type and adjust explicitly for square footage, renovation level, and in-unit laundry.
- Net effective rent, not asking rent, is the comparable figure. Two months free on a twelve month lease is a 17% discount.
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.
- Mark to Market
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.
- Submarket
A submarket is a geographic subdivision of a metropolitan area that functions as a distinct competitive set, where properties compete directly with each other for the same pool of renters.
- Price Per Unit
Price per unit is a property's total purchase price divided by its number of units, and it is the standard shorthand for comparing multifamily pricing across deals in a market.