In Practice
Vacancy loss is the dollar cost of empty apartments. On the income statement it appears as a deduction from gross potential rent, and it is often the largest one. Every day a unit sits empty, the property is giving up that day's rent, plus it still pays utilities, insurance, taxes and everything else.
On-site teams fight vacancy loss in three ways. Quick turns shorten the time units sit empty. Strong marketing and tours fill them. Renewals keep them from emptying in the first place. Each day matters. A unit that turns in five days instead of ten saves the rent for five days.
An example: a 1,500 dollar apartment is vacant for 30 days between residents. Vacancy loss for that unit is about 1,500 dollars for the month, plus turn costs. At 4 units like that, the loss is 6,000 dollars. The numbers are only an example.
A common mistake is looking at occupancy alone. A community can be 95 percent occupied and still lose money if units sit empty for long stretches in between or if concessions eat the rent. Another is not tracking the cause. Slow make-ready, weak pricing and few tours each need a different fix, so measure days vacant by unit.
How to calculate it
Vacancy loss = market rent of each vacant unit times the days it was vacant, divided by days in the period. Example only: a 1,500 dollar unit vacant 30 days in a 30-day month is 1,500 dollars of vacancy loss.
Not to Be Confused With
Vacancy loss is dollars of rent lost. Vacancy rate is the percentage of units or rent that is empty.
Vacancy Loss: Common Questions
What is the difference between vacancy loss and vacancy rate?
Vacancy rate is a percentage of units or rent. Vacancy loss is the dollar amount of rent lost to empty units.
How can a manager reduce vacancy loss?
Shorten turn times, price units based on real demand, follow up with prospects quickly and focus on renewals so fewer units turn at all.
