Enter the initial rent, the annual inflation rate, and the number of years into the calculator to determine the adjusted rent.
Rental Inflation Formula
The following formula is used to calculate the adjusted rent after accounting for inflation.
AR = IR * (1 + IR)^Y
Variables:
- AR is the adjusted rent ($)
- IR is the initial rent ($)
- IR% is the annual inflation rate (%)
- Y is the number of years
To calculate the adjusted rent, multiply the initial rent by the cumulative effect of the annual inflation rate compounded over the number of years.
What is Rental Inflation?
Rental inflation refers to the increase in rental prices over time due to the general rise in the price level of goods and services in an economy. It is a specific application of the concept of inflation to the rental market. Landlords and property managers often adjust rent to keep up with inflation to maintain the real value of their rental income.
How to Calculate Adjusted Rent?
The following steps outline how to calculate the adjusted rent due to inflation.
- First, determine the initial rent (IR) in dollars.
- Next, determine the annual inflation rate (IR%) as a percentage.
- Next, determine the number of years (Y) over which the rent will be adjusted.
- Next, gather the formula from above = AR = IR * (1 + IR%)^Y.
- Finally, calculate the adjusted rent (AR) in dollars.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
initial rent (IR) = $1,000
annual inflation rate (IR%) = 3%
number of years (Y) = 5