Definition
Vacancy loss is lost income during unit unoccupancy. Budget realistic vacancy rates (3-7%); unsustainable without external income.
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Vacancy loss is predictable in underwriting using expected vacancy rates (3-7% typical). Market conditions affect vacancy rates. Seasonal variations change vacancy. Economic downturns increase vacancy. Vacancy cost includes lost rent plus turnover costs. Reduced profit directly from vacancy. Professional management minimizes vacancy. Competitive rent and quality property reduce vacancy. Reserves should account for vacancy. Vacancy factors in pro forma analysis. Realistic projections include vacancy assumptions. Growth strategies reduce vacancy through quality.
Pro Tip
Include realistic vacancy assumptions in investment underwriting.
Example
5% vacancy rate assumption reduced pro forma income 5% accounting for market reality.