Definition
Vacancy rate is percentage of units unoccupied. Healthy markets have 5-10% vacancy; rates above 10% suggest overpricing or problems.
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Vacancy rates directly impact cash flow and are influenced by rent prices, market conditions, tenant quality, and property maintenance. Historical vacancy rates in a property guide realistic income projections. A healthy market typically has 5-10% vacancy; rates above 10% suggest overpricing or property issues.
Pro Tip
Budget conservatively using historical market vacancy rates.
Example
A 10-unit property with 1 vacant unit has a 10% vacancy rate; if budgeting conservatively, assume 8-10% vacancy even if currently full