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Vacancy Rate
The percentage of time a rental property is unoccupied and not generating income.
Definition
Vacancy rate represents the proportion of rental units or time periods that a property sits empty. A 5% vacancy rate on a single-family rental means roughly 18 days per year without rental income. Investors should always factor vacancy into their financial projections, typically budgeting 5-10% of gross rent depending on the market. High vacancy rates signal weak demand, poor management, or overpriced rents. Vacancy directly reduces effective gross income and therefore NOI and DSCR. Researching local vacancy rates before purchasing helps set realistic income expectations.
How This Relates to DSCR Loans
DSCR lenders may use market rent from the appraisal rather than actual rent, but vacancy assumptions still affect your real-world cash flow and ability to make payments.
Related Terms
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Market Rent
The rental rate a property would command in the open market based on comparable rental properties.
Absorption Rate
The rate at which available properties are sold or rented in a market over a given period.
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