Vacancy Rate
The percentage of time a property is expected to be unoccupied.
Definition
Vacancy rate estimates how much of your rental income will be lost due to turnover, tenant move-outs, and time between tenants. It's expressed as a percentage of gross rent.
Typical Vacancy Rates
- 3-5% — Strong rental markets with high demand
- 5-8% — Average for most residential markets
- 10%+ — Weaker markets or properties with turnover issues
How to Use in Analysis
Multiply your gross rent by (1 - vacancy rate) to get effective gross income. For example, $2,000/month × 12 months × 95% = $22,800 effective gross income.
Factors Affecting Vacancy
- Local market conditions and demand
- Property condition and amenities
- Rent pricing relative to market
- Tenant screening and retention practices