What Vacancy Rate Should You Use?
Zero vacancy is the single most common lie in a rental pro forma. Here is what to use instead.
3.9%
Structural vacancy for a 24-month tenancy with 30 days to re-lease.
Derive it instead of guessing
Most people plug 5% because that is the number in the template. It is a reasonable default, but you can do much better in about two minutes, because vacancy is really a function of just two things you can estimate for a specific property.
Vacancy rate = Days to re-lease ÷ (Average tenancy + Days to re-lease)
Both in days. Tenancy length is the average time a tenant stays; days to re-lease covers marketing, showings, screening and the gap before the new lease starts.
A typical suburban single-family rental
- Average tenancy
- 24 months (730 days)
- Days to re-lease
- 30 days
- 30 ÷ (730 + 30)
- 3.9%
Structural vacancy ≈ 4% — then add make-ready time and credit loss.
The value of doing it this way is that both inputs are researchable. Days to re-lease comes straight from days-on-market on comparable rental listings. Average tenancy comes from a local property manager, who will know it to within a few months for your submarket and asset type.
Typical ranges by asset type
| Property type | Structural vacancy | Why |
|---|---|---|
| Single-family, good school district | 3% – 5% | Long tenancies — families move less. Turnover is rare but each one is a full month or more. |
| Suburban townhouse / small multi, B class | 5% – 7% | Shorter tenancies, faster re-leasing. The two effects partly cancel. |
| Urban apartment, young professional tenant | 6% – 9% | Annual turnover is common; re-leasing is quick but constant. |
| C-class, workforce housing | 8% – 12% | High turnover plus credit loss. The two compound. |
| Student rental | Seasonal, effectively 8% – 17% | Leases follow the academic calendar. Missing the leasing window can cost a full year. |
| Short-term rental | Not comparable — model occupancy directly | Occupancy of 60–70% is normal and expected, not a vacancy problem. |
The three things people forget to add
| Item | Typical size | Note |
|---|---|---|
| Make-ready time | 7 – 21 days per turnover | The unit is not rentable while it is being painted and cleaned. This is on top of marketing time. |
| Credit loss / bad debt | 0.5% – 5% of gross rent | Rent scheduled and never collected. Distinct from vacancy and often modelled in the same line. |
| Concessions | 0 – 1 month per lease | In soft markets, “first month free” is a real 8% haircut that never appears as vacancy. |
Add those to the 3.9% above and a realistic total for that property is around 6–7% — not the 4% the formula produced, and comfortably above the 5% most people plug. The formula is a floor, not an answer.
“It’s currently rented” is not a vacancy rate
Where to get real data
| Source | What it gives you |
|---|---|
| Days-on-market on comparable rental listings | Your re-lease time, directly. Look at what actually rented, not what is still listed. |
| A local property manager | Average tenancy for your asset type and submarket — the input you cannot get anywhere else. |
| Census rental vacancy data by metro | A regional sanity check. Too coarse for a specific property but good for catching a market-wide problem. |
| The property’s own twelve-month ledger | Actual collected rent versus scheduled rent — which is vacancy and credit loss combined, measured. |
What it does to the deal
On the $240,000 example — $25,200 gross rent, NOI $15,004 at 5% vacancy — each additional point of vacancy costs $252 a year of NOI. Going from 5% to 8% removes $756, which takes annual cash flow from $995 to $239 and DSCR from 1.07 to 1.02. A three-point vacancy assumption is the difference between a thin deal and no deal.
That sensitivity is why it is worth spending two minutes on the derivation rather than accepting the template default. Run both numbers in the free calculator and see which side of your threshold the property falls on. And if the answer changes with a three-point move, you have learned something more useful than the vacancy rate: this deal has no margin.
Frequently asked questions
What vacancy rate should I use for a rental property?
Derive it from turnover rather than copying a default: days to re-lease divided by average tenancy plus days to re-lease, then add make-ready time and credit loss. For a typical suburban single-family rental that lands around 5 to 7%; urban apartments and workforce housing run higher.
Is 5% vacancy realistic?
It is a reasonable default for a well-located single-family rental with long tenancies, and it is optimistic for higher-turnover urban or workforce properties. The figure is only realistic if it includes make-ready time between tenants, which the raw turnover calculation leaves out.
Should vacancy be calculated on gross or effective rent?
On gross scheduled rent — vacancy is precisely the gap between scheduled and collected rent, so applying it to collected rent is circular. DealQuanta takes percentage-based vacancy and expenses on gross scheduled rent for this reason.
Does vacancy include the time spent renovating between tenants?
It should. If the unit is not available to rent, it is vacant, whatever the reason. Modelling only the marketing period and ignoring a two-week make-ready understates vacancy by roughly a third on a typical turnover.