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.
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Where this comes up: getting ready
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
In your Room, this word explains itself where it appears.
Your Room defines vacancy rate in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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