Vacancy Rate Loss Calculator

Vacancy rate is the percentage of time or units that are unoccupied and not generating rental income in a given period. A 5% vacancy rate means a property is unoccupied or between tenants 5% of the year, which equals about 18 days per year for a single-family rental or 5% of units at any given time for a multifamily property.

Annual Vacancy Loss = Annual Gross Potential Rent x (Vacancy Rate / 100). Effective Gross Income = Annual Gross Potential Rent - Annual Vacancy Loss. For example, $24,000 annual rent with 8% vacancy = $1,920 vacancy loss and $22,080 effective gross income.

The U.S. Census Bureau's Housing Vacancies and Homeownership Survey tracks vacancy rates by region. Nationally, rental vacancy rates have ranged from approximately 5 to 7% in recent years, though rates vary widely by market, property type, and neighborhood. Always use a local market vacancy rate for your analysis rather than a national average.

Vacancy directly reduces effective gross income, which reduces NOI, which reduces both cap rate performance and cash flow. A property modeled at 0% vacancy will significantly overstate income. Most investors model at least 5% vacancy even for properties with good tenant histories to create a margin of safety.

Credit loss (also called collection loss) is income lost due to tenants not paying rent, as opposed to physical vacancy from empty units. Together, vacancy and credit loss are called 'vacancy and credit loss' or 'V&C loss.' In underwriting, they are typically combined as a single deduction from gross potential rent, often between 5 and 10% for residential properties.