Vacancy rate
The share of rental units sitting empty at a given time, either for a specific property or a whole market. Included in underwriting as a percentage of gross rent that won't get collected.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Buyers of a rental subtract a vacancy allowance from the rent whether or not the building is full, because tenants leave. A seller quoting full occupancy as permanent income is quoting a number no underwriter will use.
Part 2 of 4
A simple example
Your fourplex has been full for two years. The buyer still underwrites 5% vacancy, about $2,400 a year, because that is the market's rate.
| The situation | What the buyer uses |
|---|---|
| Full for two years | The market vacancy rate anyway |
| One unit empty for months | Their own estimate, and a question about why |
| A market with 10% vacancy | 10%, whatever your building shows |
Vacancy is an assumption, not an observation. Buyers assume some even when they see none.
Part 3 of 4
What people get wrong
That full occupancy means 0% vacancy in the numbers. It means 0% today, and underwriting is about the next ten years.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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