Definition
Vacancy rate
Vacancy rate is the share of available rental capacity that sits empty over a measured period. In this underwriting model, the same allowance is also applied to gross potential income to account for empty units and uncollected rent. Use the property's own lease-up history and current local evidence rather than an unsupported national benchmark.
Vacancy loss = gross potential income × vacancy rate
Worked example
5% of $32,700 of potential income is $1,635 a year, or about 18 days of rent.
Every example in this glossary uses the same deal: a $265,000 duplex renting for $2,650 a month, bought with 25% down at 6.75% over 30 years, producing $19,310 of net operating income.
The mistake to avoid
Where this is calculated
The vacancy rate calculator computes this from your own numbers and shows the arithmetic expanded. Empty days and vacant unit-months turned into the rent they cost, then fed back through your own deal as real NOI and cash-flow differences against your underwriting allowance.
Related terms
- Net operating incomeNet operating income is what a property earns after vacancy and operating expenses but before any mortgage payment, depreciation or income tax.
- Effective gross incomeEffective gross income is gross potential income minus vacancy and credit loss.
- Operating expensesOperating expenses are the recurring costs of running the property: taxes, insurance, management, maintenance, utilities the owner pays, HOA dues, and a reserve for capital replacement.
- Occupancy rateOccupancy rate is the complement of vacancy: the share of available capacity that is occupied, so 95% occupancy and 5% vacancy describe one fact from two sides.
Back to the full glossary — 21 terms with formulas and worked examples.