What vacancy rate should I underwrite?

Use market vacancy plus a stabilization cushion: 5–8% for stabilized residential, 10–15% for turnaround properties, 15–20%+ for value-add with lease-up risk.

How does vacancy affect value?

Value = NOI / Cap Rate. A $10k NOI reduction from vacancy lowers value by $200k at a 5% cap rate. Vacancy sensitivity compounds at low cap rates.

Physical vs economic vacancy?

Physical vacancy = unoccupied units. Economic vacancy = income loss from concessions, non-payment, and free rent periods. Economic vacancy is always higher.

Vacancy Allowance Impact on NOI Calculator

Model how changes in vacancy rate affect NOI and property value. A 1% increase in vacancy on a $2M property at 5% cap rate reduces value by $20,000+.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Model how changes in vacancy rate affect NOI and property value. A 1% increase in vacancy on a $2M property at 5% cap rate reduces value by $20,000+. Use the vacancy impact on noi result to inform your calculation.

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Vacancy Allowance Impact on NOI Calculator

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Frequently Asked Questions

What vacancy rate should I underwrite?

How does vacancy affect value?

Physical vs economic vacancy?