How to Calculate Vacancy Rate for a Rental Property (2026)

To calculate vacancy rate, divide the number of vacant units by the total units (or vacant days by total available days) and multiply by 100: vacancy rate = vacant units ÷ total units × 100. For a 10-unit building with 1 empty unit, that is 1 ÷ 10 × 100 = 10%. Run your own numbers with the Vacancy Rate Calculator, which also reports economic vacancy and annual income loss.

I manage a 10-unit building, and in 2024 a single unit sat vacant for 60 days during a tenant turnover. At $1,500 a month, those two empty months cost me $3,000 in rent I never collected — money that no spreadsheet showed until I tracked vacancy as its own line item. That $3,000 gap on $180,000 of potential annual rent is a 1.7% economic vacancy hit from one unit, one time.

Vacancy rate is the share of rental income you lose to empty units and uncollected rent. It drives cash flow, valuation, and whether a lender will fund your next deal. This guide shows how to calculate vacancy rate two ways, the difference between physical and economic vacancy, and what a healthy number looks like in 2026.

The Vacancy Rate Formula

There are two standard ways to calculate vacancy rate. Both produce a percentage, but they answer different questions.

Unit-based (physical) vacancy:

Physical Vacancy Rate = Vacant Units ÷ Total Units × 100

Time-based vacancy (for a single unit or short period):

Vacancy Rate = Vacant Days ÷ Total Available Days × 100

The unit method works for a building or portfolio at a single point in time. The day method works when you want to measure how long one unit sat empty across a year. A unit vacant 30 days out of 365 has a vacancy rate of 30 ÷ 365 × 100 = 8.2%.

Use the largest meaningful denominator. For a 12-unit portfolio measured over a full year, multiply units by months: 12 units × 12 months = 144 unit-months available, then divide vacant unit-months by 144.

Each row is days vacant ÷ 365 × 100. A 60-day turnover on a single unit reads as a 16.4% annual vacancy rate for that unit, which is why fast turnovers matter so much on small properties.

Physical vs Economic Vacancy

Physical vacancy counts empty units. Economic vacancy measures every dollar of rent you did not collect, including concessions, free months, bad debt, and partial payments. Economic vacancy is always equal to or higher than physical vacancy.

The economic formula compares what you could have collected to what you actually banked:

Economic Vacancy Rate = (Potential Gross Income − Collected Income) ÷ Potential Gross Income × 100

Here is why the gap matters. Two buildings can both show 10% physical vacancy, but the one giving rent concessions loses far more income. The table below works three real scenarios on the same denominator logic.

Re-derive each row:

• Building A: Potential = 10 × $1,500 × 12 = $180,000. One unit empty all year loses 1 × $1,500 × 12 = $18,000, so collected = $162,000. Economic = $18,000 ÷ $180,000 × 100 = 10.0%, identical to physical because vacancy is the only loss.
• Building B: Same $180,000 potential. Losses: vacant unit $18,000, a $500/month concession ($6,000/yr), and $1,500 of bad debt = $25,500 total. Collected = $180,000 − $25,500 = $154,500. Economic = $25,500 ÷ $180,000 × 100 = 14.2%, well above the 10% physical reading.
• Building C: Potential = 4 × $2,000 × 12 = $96,000. Every unit is occupied, so physical vacancy is 0%, yet collected is only $90,000. Economic = ($96,000 − $90,000) ÷ $96,000 × 100 = 6.3%, all from concessions and partial payments.

Building C is the trap: a 0% physical vacancy report hides a 6.3% income leak. When you calculate vacancy rate, always run the economic version too.

What Is a Good Vacancy Rate?

A healthy residential vacancy rate is 3-7% across most US markets. Below 3% signals a tight market where you may be under-pricing rent; above 10% points to oversupply, deferred maintenance, or weak management. The national residential vacancy rate has hovered near 6-7% in recent Census Bureau readings.

Benchmarks shift by property class and type. Class A apartments often run 3-5%, while Class C buildings commonly sit at 8-12%. Single-family rentals average 3-5%, and student housing swings 5-15% with the academic cycle. Compare your number to local comps within 0.5 miles, not just the national figure.

Vacancy Rate Drives Income and Value

Every point of vacancy comes straight out of effective gross income. On a $180,000 potential-rent building, the dollar impact is easy to project: multiply the rate by potential income to get the loss, then subtract.

Each loss is rate × $180,000: 0.03 × $180,000 = $5,400, 0.10 × $180,000 = $18,000, and so on. Effective gross income is $180,000 minus that loss.

That income loss compounds into valuation through the cap rate. Net operating income (NOI) falls with vacancy, and value equals NOI ÷ cap rate. At a 50% expense ratio and a 6% cap rate, the swing is large.

Re-derive the 10% row: EGI $162,000, NOI = $162,000 × 0.50 = $81,000, value = $81,000 ÷ 0.06 = $1,350,000. Moving from 10% to 5% vacancy lifts NOI from $81,000 to $85,500, a $4,500 gain that adds $4,500 ÷ 0.06 = $75,000 in value. Cutting vacancy is a valuation lever, not just a cash-flow fix.

To see how that NOI feeds returns, pair this with the Cap Rate Calculator and the ROI Calculator. For financed deals, the Cash on Cash Return Calculator shows how vacancy hits your actual cash yield after debt service.

How to Reduce Vacancy

Vacancy is partly a pricing problem and partly a process problem. The biggest controllable lever is turnover time — the gap between one tenant leaving and the next paying rent.

• Price within 5% of comparable listings; overpricing by 10% can add weeks of empty days.
• Start marketing 60-90 days before a lease expires to shrink the turnover gap.
• Respond to inquiries within one hour to capture more showings.
• Offer one free month rather than a permanent rent cut, which protects your base rent and the property's appraised income.
• Use professional photos, which measurably increase inquiry volume.

On my building, moving from a reactive "list it after they leave" approach to pre-marketing 75 days out cut my average turnover from 60 days to under 20. That alone took the per-turn loss from $3,000 to roughly $1,000 at $1,500/month rent.

Worked Example: Step by Step

Suppose you own a 12-unit building. Over the year, units sat empty for a combined 18 unit-months, average rent is $1,300, and you also gave $4,800 in concessions plus wrote off $2,600 in bad debt.

1. Available unit-months: 12 units × 12 months = 144.
2. Physical vacancy: 18 ÷ 144 × 100 = 12.5%.
3. Potential gross income: 144 × $1,300 = $187,200.
4. Vacancy loss: 18 × $1,300 = $23,400.
5. Total income loss: $23,400 + $4,800 + $2,600 = $30,800.
6. Collected income: $187,200 − $30,800 = $156,400.
7. Economic vacancy: $30,800 ÷ $187,200 × 100 = 16.5%.

The physical reading is 12.5%, but the economic reading is 16.5% — a 4-point spread driven entirely by concessions and bad debt. The fastest way to calculate vacancy rate both ways without arithmetic slips is the Vacancy Rate Calculator, which outputs physical vacancy, economic vacancy, occupancy, and annual income loss from the same inputs.

Frequently Asked Questions

How do you calculate vacancy rate for a rental property?

To calculate vacancy rate, divide vacant units by total units and multiply by 100, or divide vacant days by total available days for a single unit. A 10-unit building with 1 empty unit is 1 ÷ 10 × 100 = 10%. Add the economic formula — (potential income − collected income) ÷ potential income × 100 — to capture concessions and bad debt.

What is a good vacancy rate for a rental property?

A good residential vacancy rate is 3-7% in most US markets, with the national average near 6-7%. Rates under 3% suggest you can raise rent, while rates over 10% point to oversupply or property problems. Class A apartments often run 3-5% and Class C buildings 8-12%.

What is the difference between physical and economic vacancy?

Physical vacancy counts only empty units, while economic vacancy measures every dollar of rent lost to vacancy, concessions, free months, and bad debt. Economic vacancy is always equal to or higher than physical vacancy. A fully occupied building can still post a 6% economic vacancy rate from concessions alone.

How do you calculate vacancy rate by days instead of units?

Divide the number of days a unit was vacant by the total days it was available and multiply by 100. A unit empty for 30 days out of 365 has a vacancy rate of 30 ÷ 365 × 100 = 8.2%. This day-based method is best for single-unit rentals where the unit-count method does not apply.

How does vacancy rate affect property value?

Vacancy lowers net operating income, and value equals NOI divided by the cap rate, so higher vacancy means lower value. On a $180,000 potential-income building at a 6% cap rate, cutting vacancy from 10% to 5% adds about $75,000 in value. That is why lenders and appraisers scrutinize the economic vacancy assumption.

What vacancy rate do lenders use for underwriting?

Lenders typically apply a 5-10% vacancy assumption when underwriting rental loans, even if your actual vacancy is lower. They stress-test income to make sure the property covers debt service under softer conditions. Banks often use the higher of your trailing economic vacancy or a market-floor figure.

Related Articles

• Real Estate Appreciation Calculator: Pros and Cons — How appreciation and income combine to drive total return on a rental.
• Components of a Mortgage Payment — Where your rent dollars go once debt service, taxes, and insurance are covered.

Related Calculators

• Vacancy Rate Calculator — Compute physical and economic vacancy plus annual income loss.
• Cap Rate Calculator — Turn NOI into a value and yield estimate.
• Cash on Cash Return Calculator — See how vacancy hits your post-financing cash yield.
• ROI Calculator — Measure total return across any holding period.

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This article is for educational purposes and is not investment advice. Verify local market vacancy data and consult a qualified professional before making property decisions.