Vacancy Rate
Definition:
Vacancy rate refers to the percentage of all available rental units in a property that are vacant or unoccupied during a certain period. It is used to measure the rental demand for a property and helps investors or property managers assess how effectively they are filling their rental units. A higher vacancy rate can indicate lower demand or inefficiencies in management, while a lower vacancy rate suggests high demand and occupancy.
🔍 Did You Know?
A common benchmark for vacancy rates in residential real estate is between 5% and 8%. However, this can vary based on location, property type, and market conditions.
Some larger REITs (Real estate investment trusts) publish vacancy rates of less than 5%. However they often exclude properties from the calculation so make sure to read the fine print!
Examples:
Example 1:
You own an apartment building with 50 units, and 5 of them are vacant during the year.
The vacancy rate is calculated as:
[(5 vacant units Ă· 50 total units) x 100 = 10%]
This means 10% of your property was vacant during the year.
Example 2:
An investor owns a commercial office building with 100 spaces. If 15 of those spaces are unoccupied, the vacancy rate would be:
[(15 vacant spaces Ă· 100 total spaces) x 100 = 15%]
Why It’s Important:
Vacancy rate is an important metric for real estate investors and property managers because it directly impacts rental income. A higher vacancy rate can lead to reduced cash flow, while a lower vacancy rate indicates high demand and more consistent rental income. Tracking vacancy rates helps investors make informed decisions about rental pricing, marketing, and property improvements to attract more tenants.
Who Should Care:
- Real estate investors assessing the profitability and demand for rental properties.
- Property managers who need to keep vacancy rates low to maximize rental income.
- Landlords managing multiple units and aiming to maintain high occupancy levels.
The open real estate company
Picket is on a mission to make real estate open, efficient, and fun for all
Try Picket
Picket Team
Create Your Picket Account
Open {pricing} API
Already have your own system? No problem. Try Picket's API instead.
Developer Docs
