What is Vacancy Rate?
Vacancy rate is the percentage of time a rental property is unoccupied and not generating rent, expressed annually. National average sits around 6-8% for single-family rentals in 2026, but varies meaningfully by market and unit quality.
Vacancy includes both turnover vacancy (the time between tenants) and persistent vacancy (a unit that won't lease at the asked rent). Underwrite to 5-8% in most markets; tighter (3-5%) in supply-constrained markets like Charlotte or Raleigh; looser (8-12%) in oversupplied or class-C markets.
A common error is using "fully occupied" pro-forma cash flow numbers when shopping for properties. Always discount gross rent by your assumed vacancy rate before computing cash flow or DSCR.
Vacancy is partially controllable: pricing the unit correctly at lease-end (asking 5% above market produces 30+ days of vacancy that costs more than the rent bump captures), maintaining the unit so good tenants want to stay, and screening rigorously so leases run their full term.
Concepts that connect.
Net Operating Income (NOI) is a rental property's annual gross rental income minus all operating expenses, before debt service and income taxes. NOI is the denominator of cap rate and the numerator of DSCR — it's the most-used number in rental underwriting.
Cash-on-cash return is annual pre-tax cash flow divided by the total cash the investor put into the deal (down payment + closing + rehab + reserves). Unlike cap rate, it accounts for financing. The most useful metric for comparing leveraged investments.
Property management is the third-party service of leasing, collecting rent, handling repairs, and managing tenant relationships on a landlord's behalf. Typical cost in 2026: 8-10% of monthly rent collected, plus a leasing fee of 50-100% of one month's rent on new tenants.
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