These two numbers describe the same property and are rarely identical. Market rent is an estimate, built from a comparable rent schedule. Actual rent is a fact, taken directly from a signed lease. Confusing the two — or assuming a lender will use whichever is higher — is a common source of a DSCR ratio coming in lower than expected.
Why the two diverge
A lease signed a year or two ago below today’s market, a long-term tenant whose rent was never raised, a unit renovated since the lease was signed, or simply a thin set of comparables the appraiser had to work from — any of these can put actual and market rent meaningfully apart, in either direction.
How each one is produced
Actual rent comes straight from the lease, with no estimation involved. Market rent is produced by the appraiser through a comparable rent schedule, formalized as Form 1007 on a one-unit property or built into Form 1025 on a two-to-four unit property.
Which number qualifies a loan
Policy on this varies by lender — some use the lower of the two figures, some allow actual rent to govern up to a cap above market rent, and some rely on market rent alone for a vacant property. That variance is significant enough to change a deal’s qualifying ratio, and it is covered in detail in our 1007 rent schedule guide.
Vacant properties have no actual rent
A vacant or newly acquired property has no lease to draw from, so market rent from the appraisal is generally the only figure available to qualify the loan.
What to do when the two disagree
If the appraiser’s market rent lands well below the signed lease, a reconsideration request supported by the lease and additional comparables is generally the available remedy — see appraisal reconsideration of value.
Market Rent vs. Actual Rent FAQ
An appraiser’s opinion of what a property should currently rent for, based on comparable rented properties nearby.
The rent stated in an existing, signed lease on the property — a documented fact rather than an estimate.
It varies by lender. Some use the lower of the two, some allow actual rent up to a cap above market rent, and some use market rent alone on vacant properties. Confirm the specific policy with the lender.
Often because the appraiser’s available comparables lag a fast-moving rental market, or because the unit has features the comparables did not capture.
Commonly because a long-term tenant’s rent was never raised to keep pace with the market, or because the lease predates a renovation.