Loss to Lease and the Leasing Bell Curve: What Investors Miss When Modeling Rent Growth Many underwriting models show rent increases like flipping a switch. But in real life, rent growth is a slow drip—not a lightbulb. If you’re modeling a 10% rent increase across the board, but your leases are staggered, you're not getting that 10% this year—not even close. That’s where Loss to Lease (LTOL) and the Leasing Bell Curve come into play. 🔍 What Is Loss to Lease (LTOL)? Definition: The difference between what tenants should be paying (market rent) and what they are paying (in-place rent). Formula: Market Rent – Actual Rent Paid = LTOL Example: Market Rent: $1,500 In-Place Rent: $1,300 LTOL = $200 per unit If that $200 gap exists across 100 units, that’s $20,000/month or $240,000/year in unrealized income. But—and here’s the key—you don’t capture all of that in Year 1 unless all units are vacant or all units' leases renewals or turnovers occur at one time (Think Student Apartments). That’s where the leasing bell curve comes into play. 📈 What Is the Leasing Bell Curve? This describes how lease expirations are distributed across a 12-month period. In a stabilized property, lease renewals are typically staggered, with more leases expiring during peak moving months (May through August), and fewer in winter. That means: Only a portion of units are available to reprice each month. Even in a perfect market, with full demand and no resistance, you can’t adjust every lease right away. ✅ Ken’s Rule of Thumb Until you model the lease expiration schedule directly: Add the LTOL equal to half of your rent growth rate for each year. This keeps your model grounded in how leases and time actually work. 🧠 Why This Matters LTOL shows opportunity—but only if you can close the gap The leasing bell curve tells you how fast you can close it Without this, your model is optimistic at best, and misleading at worst In short: Loss to Lease tells you there’s money on the table. The Leasing Bell Curve tells you how long it’ll take to pick it up. If you're not accounting for both, you're not underwriting—you’re guessing.