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.

Matt Abadi is the founder of DealIntel. He leads the development of the platform's six-strategy underwriting engine, 25-point Kill List, and Monte-Carlo financial model — the institutional analysis stack DealIntel applies to every fix and flip deal. DealIntel was founded in 2025 with the central thesis that knowing when not to invest is the most valuable number on the page.