Vacancy rate
The percentage of time a unit sits unrented. Underestimating it is the most common pro-forma error.
Vacancy rate is the share of potential rent lost to empty units. It bundles two things: lease-up time between tenants, and longer gaps due to renovations or market softness.
Formula: Vacancy = Days vacant ÷ 365.
Reasonable assumptions
- Strong A-class suburb: 3–5%.
- B-class urban: 5–8%.
- C-class with higher turnover: 8–12%.
- Brand-new lease-up or value-add: assume 2–6 months of full vacancy.
Sellers often pro-forma 3% vacancy regardless of market. Always re-underwrite at a realistic local number.
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