Loss to Lease Calculation Overview

The loss to lease calculation includes the following options: Gross Potential or Recurring Charges. The calculations for each option are explained below.

The loss to lease calculation affects the Reconciliation Report, Rent Summary Report, and Transfer to G/L.

Recommendations

If you select Floating Potential for Method to Calculate Lost Rent, then Method to Calculate Loss to Lease should be Gross Potential. These options correspond to how PowerSite worked.

If you use Days Vacant @ Market Rent or Days Vacant @ Last Lease Rent for Method to Calculate Lost Rent, then Method to Calculate Loss to Lease should be set to Recurring Charges, as both of these options are based on actual occupancy rather than financial occupancy.

Gross Potential

This option is the default. Select this method when you want the system to use the difference between Market Rent and Unit Gross Potential Rent for Loss to Lease.

(Loss to Lease) Gross Potential = Unit Market Rent - [Unit Gross Potential]*

*Unit Gross Potential depends on whether the unit is vacant or occupied on the day of calculation:

If the unit is vacant on the day of calculation, then
Unit Gross Potential = Market Rent
If the unit is occupied on the day of calculation, then
Unit Gross Potential = (Actual Charges for the period for potential income codes) + lost rent.

Note:

Normally, if Loss to Lease is set to Gross Potential, then Lost Rent will be set to Floating Potential and therefore this is the same as active recurring charges for potential.

Example

Accounting period is 4/25 to 5/24 (30 days).

Market Rent is $1,000/month.

Unit is occupied at $900/month.

From 4/1 to 4/30, Unit Market Rent is $1,000.
Unit Gross Potential = (Actual Charges for potential income codes ($900)) + Lost Rent ($0)
(Loss to Lease) Gross Potential = Unit Market Rent ($1,000) - Unit Gross Potential ($900)

So, total loss to lease is $100.

Recurring Charges

Select this method when you want the system to use a method that takes into consideration the market rent, the occupancy status, and the active recurring charges for each day in the accounting period.

Recurring Charges = Market Rent - [Recurring Charges to Potential Codes on a day-by-day basis]

Market Rent is determined for each day in the accounting period using the method in this example.

First, the market rent history is used to calculate changes in market rent during the period. For example, if market rent is $1,000 and has not changed, and days in period is 31, then market rent is $1,000/31 per day.
Then, the occupancy status is determined for each day in the accounting period, ignoring the policy for occupied on day of move out. Expected move-ins/move-outs are processed and only actual move-ins/move-outs are included. This corresponds to the calculations used for Lost Rent @ Days Vacant.
The active recurring charges are determined for each day in the accounting period. Again, expected move-ins/move-outs are processed and only actual move-ins/move-outs are included.
For each occupied day, the difference between Market and Active charges is added up. This total is the Loss to Lease for the unit. The total is rounded to the nearest cent at the end of the calculation.

Example

Accounting period is 4/25 to 5/24 (30 days).

Market Rent is $1,100 through 4/30 and $1,200 from 5/1 on.

Unit is occupied by resident A at $1,050 through 5/10, vacant after that, and occupied by resident B at $1,110 on 5/20.

From 4/25 to 4/30, market rent is $1,100/30 (approximately $36.6667 per day) and recurring charges are $1,050 divided by 30 ($35 a day) for a Loss to Lease on resident A of $1.66667 times 6 (or $10).
From 5/1 to 5/10, market rent is $1,200 divided by 30 ($40/day) and recurring charges are still $35 per day for a loss to lease on resident A of $50.
From 5/20 to 5/24 market rent is $40 per day and recurring charges are $1,110 divided by 30 ($37 per day) for a loss to lease on resident B of $3 times 5 ($15).

So, total loss to lease is $75 ($10+$50+$15).