Faro Labs / Tools / Vacancy rate calculator
Vacancy rate calculator
Turn turnovers and days-empty into the vacancy percentage your underwriting actually needs, and the dollars it costs, including the losses physical vacancy misses.
How vacancy is measured
Vacancy is the line most often set by habit: 5 percent, because that's what the spreadsheet said. Built from the ground up it's just arithmetic: how often tenants leave, and how long the unit sits before the next one moves in. Two turnovers a year at three weeks each on a fourplex is 42 unit-days out of 1,460, or 2.9 percent. The same two turnovers on a single-family house is 11.5 percent.
Small properties carry more vacancy risk
That asymmetry is the point. A single-family rental is binary, it's either 100 percent occupied or 100 percent empty, so one bad turnover swamps the year. A twenty-unit building averages its turnovers into something close to the market rate. This is why single-family underwriting deserves a higher vacancy assumption than the market statistic suggests, not a lower one.
Economic vacancy tells the fuller truth
Physical vacancy counts empty days; economic vacancy counts lost dollars. A unit rented at a discount, a free first month, a tenant who stopped paying before leaving: all show as fully occupied physically and all reduce what the property collects. Underwrite to the economic number.
Vacancy questions
What vacancy rate should I underwrite?
Five percent is the common default: roughly 18 days a year, about one turnover with a short marketing window. Use 3 to 4 percent only in genuinely tight markets with proof, and 8 to 10 percent in soft markets, in high-turnover student or workforce housing, or for a single-family rental where one long vacancy has nothing to average against.
Physical vs economic vacancy, which do lenders use?
Lenders underwrite to economic vacancy, because it's the one that shows up in collections. When a rent roll and an operating statement disagree, the gap between them is economic vacancy: concessions, below-market renewals, and uncollected rent that the unit count alone can't see.
How do I lower vacancy?
Turnover length, not turnover frequency, is usually the lever. Start marketing before the current tenant leaves, have the make-ready scheduled for the day after move-out, and price at market rather than testing a premium for three weeks. A month of vacancy costs more than a year of a $50 rent discount.
Every calculator
See what vacancy does to the whole deal.
Faro runs the full underwriting on a real address, cash flow, DSCR, and a target price, with your vacancy assumption applied throughout.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.