Market Rent
The rental rate a property would command in the open market based on comparable rental properties.
Definition
Market rent is the estimated rental income a property would generate based on current demand and comparable rental listings in the same area. Appraisers determine market rent by analyzing similar properties that are currently rented or recently leased. Market rent may differ from a property's actual rent — a below-market lease presents an opportunity to increase income, while above-market rent could signal tenant turnover risk. DSCR lenders use market rent from the appraisal (not the actual lease amount) to calculate the qualifying DSCR, providing a standardized comparison across properties. Tracking market rent trends helps investors time rent increases and assess neighborhood health.
How This Relates to DSCR Loans
DSCR lenders typically use the lesser of actual rent or appraised market rent for qualification. If your lease rate exceeds market rent, the appraised market rent will be used.
Related Terms
Rent Roll
A document listing all rental units, their tenants, lease terms, and current rents.
Vacancy Rate
The percentage of time a rental property is unoccupied and not generating income.
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Appraisal
A professional assessment of a property's market value, required by lenders before funding a loan.
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