Vacancy Rate

Definition

Vacancy rate is the percentage of time a rental unit is unoccupied and not generating rent, expressed as a percentage of total available rental days. Market-wide vacancy is reported by local MLS data and Census ACS surveys. For underwriting, a 5% vacancy assumption is standard for stabilized B-tier properties in strong markets; 8–10% is conservative for C-tier or weak markets; 3% is aggressive and only justified in supply-constrained metros with documented sub-3% vacancy.

Formula

Worked example

A property rents for $2,000/mo at 5% vacancy: effective rent = $2,000 × (1 − 0.05) = $1,900/mo. At 10% vacancy: $1,800/mo. The 5% difference compounds across NOI and DSCR — at $24,000/yr stabilized rent vs $21,600/yr, the gap is $2,400/yr of NOI lost, which at a 6% cap rate is $40,000 of property value.

How DealIntel uses it

DealIntel's stress-test engine runs vacancy at 5%, 8%, and 12% on every BRRRR scenario. Deals where DSCR falls below 1.0 at 8% vacancy are flagged 'review terms' by the kill list — the operator is being asked to underwrite to a riskier vacancy assumption than the market justifies.

Related terms

• Net Operating Income · NOIGross rental income minus operating expenses, excluding debt service — the unlevered cash flow of an income property.
• Debt-Service Coverage Ratio Loan · DSCRAn investment property loan qualified on the property's rental income rather than the borrower's W-2 income.
• Cash-on-Cash ReturnAnnual pre-tax cash flow divided by total cash invested — the levered yield on actual dollars committed.

DealIntel's underwriting team builds and maintains the platform's six-strategy engine, 25-point kill list, and Monte-Carlo financial model. Every piece of long-form content on dealintel.io is reviewed by an underwriter with direct experience scoring residential investment deals.