Vacancy Rate
How is it calculated?
# of Vacant Units / Total # of Units
Goal of the Ratio
The goal of the Vacancy Rate is to identify what percentage of the total units are currently unoccupied. Alternatively, Occupancy Rate attempts to show the same thing, but instead of look at what % of units are vacant, it identifies what % of units are occupied.
When is it used?
Residential Rental Business
Rules of Thumb
Lower is better
Pitfalls of this Ratio
One pitfall of this ratio is that the calculation does not take into consideration how the rental rates compare to the potential rental rates available. A property with low rents, may have a strong vacancy rate, but due to offering below-market rental rates, it may still struggle to cover it's obligations.
What changes in the ratio could mean:
- Lease up previously unoccupied units
- Add new units
- Sell old units
- Lose occupants
Other Relevant Terms
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