Vacancy Rate

Vacancy rate is the percentage of time a rental property sits empty, or the share of units in a market that are unoccupied.

Vacancy rate is the share of time — or the share of units — a rental sits empty and producing no rent. A single-family house vacant one month out of twelve ran an 8% vacancy rate for the year. Markets have vacancy rates too: the average share of rentals sitting empty in an area, which tells investors how easy units are to fill and how much pricing power landlords have.

Vacancy shows up in underwriting as an allowance, because even a great rental does not collect rent 100% of the time. A common practice is reserving 5–10% of gross rent for vacancy — on a hypothetical $1,200-a-month rental, roughly $60 to $120 a month set aside for the gaps between tenants. The right number depends on the market and the property; an honest one comes from local data and the property's own history, not optimism.

What beginners get wrong is underwriting at zero — assuming the tenant never leaves and the rent never stops. Every turnover also drags costs with it beyond the missed rent: make-ready repairs, cleaning, marketing, sometimes a leasing fee, so the true cost of a vacancy is bigger than the empty weeks alone. Turnover frequency matters as much as the rate itself — one reason many buy-and-hold investors like Section 8 rentals, where voucher tenants tend to stay for years. Price vacancy honestly, and a deal that survives the number is a deal that can actually perform.