Underwrite
How to calculate vacancy rate (with a calculator)
Vacancy rate is the empty share of your rental capacity - in units or in days. Underwrite with 0% forever and every deal looks like a trophy. Enter vacant vs total units, or vacant days vs rentable days; get vacancy % and the rent dollars that implication costs.
Assumptions
Returns stack
- Vacancy rate
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- Vacancy loss ($)
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When to use
Setting an underwriting vacancy; comparing trailing-12 actuals to a seller's pro forma; translating "one month empty" into a rate.
When not to
Physical vacancy is not collection loss - credit loss is a separate haircut. And one luxury vacancy can skew a small portfolio percentage.
Assumptions: Unit method: vacant units ÷ total units. Time method: vacant days ÷ rentable days. Dollar drag uses gross potential rent × vacancy %.
Worked examples
Input
1 vacant of 10 units
Output
Vacancy 10%
Simple unit method - one empty door in a ten-unit stack.
Input
30 vacant days / 365
Output
Vacancy ≈ 8.2%
Time method - one month empty on an annual calendar.
Common traps
- Physical vacancy is not collection loss - credit loss is a separate haircut.
- One luxury vacancy can dominate a small portfolio percentage.
- Seller "stabilized" vacancy is often aspirational.