The term "Real Estate Vacancy Rate" and equations are used to gauge market conditions to include real estate investment properties. Vacancy rates are an important factor in determining how a property is performing compared to the area, region or national vacancy rates. National and regional rates are readily available and a great tool in offering investors insights into past, present and future market conditions. As defined, a real estate rental vacancy rate is the percentage of all available units in a rental property, such as an apartment complex, that are vacant or unoccupied at a certain time. The rate is calculated by taking the number of vacant units, multiplying that number by 100, and dividing that result by the total number of units. So, if an apartment complex has 200 units, and 20 units are unoccupied, it means the vacancy rate is 10%.

The formula to calculate the apartment complex vacancy rate is:

*20 vacant units x 100=2000/200 units = 10% vacancy rate

Vacancy rates can also be used to gauge and compare the success of an owners or property managers portfolio on annual basis. Higher than normal vacancy rates can indicate difficulty in renting a portion or all of a portfolio. Here is one example of the calculations needed to establish a simple portfolios annual vacancy rate. If a manager or owner has 20 single family rental homes with 240 days of annual vacancies:

The formula to calculate the portfolio vacancy rate is:

* 240 days vacant/ 7,300 days (365 days per year x 20 homes) =3.2% annual vacancy rate

Using "annual days vacant" to establish vacancy rates can be important in determining vacancy rates of a portfolio partly due to seasonal changes in rental market conditions. Seasonal rent trends are the changes in the rental market that coincide with fluctuations in renters moving activity during the year. They are often most effected by location, school calendars, job markets and changes in the weather. The national median rent falls by an average of 1.7% from the summer peak to its lowest point around the years end. 

When a real estate investor is looking to hire a property manager, most often they will ask the prospective property manager about their current vacancy rates. In addition to taking into account the seasonal and economic conditions, the savvy investor will delve deeper and look for more specifics such as:

1. The vacancy rate of the property managers portfolio based on the same type of property that the real estate investor owns. Comparables should have similar location, condition, amenities, price point etc. This can be very important as many property managers handle a wide variety of rental properties. Many times the property managers vacancy rates will vary depending on the specifics of each property.
2. The average "days on the market" of any properties similar to the prospective investors properties the manager is handling.
3. The number of units a property manager is managing that are being prepared to become market ready and have not yet hit the market. And are those units part of the property managers vacancy rate equation?
4. The amount of time it takes the property manager to make a newly vacated property market ready. Times will most often vary depending on the type of property.

Influencing "vacancy rate" factors of a particular property manager can be broken down even further but can sometimes be difficult to quantify. These are the factors that speak to the organization, make up and viability of the property manager to include:

1. Marketing & Leasing platforms for vacancies.
2. Ability to retain viable tenants by performing timely repairs, maintenance and resolution of other tenant issues.
3. Ability to assess market conditions and accurately price rental rates to include offering rental incentives during the slow seasons.
4. Ability to select viable tenants that will make timely rent payments and remain in good standing of the lease provisions. While lowering the qualifications for prospective tenant applications can boost short term rental sales, most times the long-term effect is negative with increased tenant turn over. 
5. Managers total number of units managed compared to the number and experience of the property managers' staff. If the property manager and staff are spread too thin and or are under qualified, the quality of service will surely suffer. Ratios of units managed, and manager's staff will vary depending on the different types of properties the property manager is handling. A property manager who manages a diverse number of properties will usually need more staff.

The U.S. Census Bureau compiles its residential vacancy data in a quarterly report that provides three key figures: the rental vacancy rate, homeowner vacancy rate and homeownership rate. National vacancy rates in the fourth quarter of 2023 were 6.6 percent for rental housing. The rental vacancy rate was higher than the rate in the fourth quarter of 2022 (5.8 percent). For more information on rental vacancy rates and how they affect you, ask an experienced property manager. Statistics can be found on the United States Census web site at www.census.gov.