Vacancy rate for rentals: what to assume in 2026 (and why 5% is usually a guess)

What vacancy actually measures (it's not just empty units)

Physical vacancy is the obvious one: days the unit sits empty between tenants, as a share of the year. One month empty out of twelve is 8.3%.

Economic vacancyis the number that matters: every dollar of scheduled rent you didn't collect. It includes empty days, plus three categories most underwrites skip:

• Concessions."First month free" on a 12-month lease is 8.3% economic vacancy on a unit that was never physically vacant for a day of the lease.
• Non-payment and evictions. A tenant who stops paying in month 8 and leaves after a 90-day eviction process produces ~25% economic vacancy for that year — while the unit shows as occupied the whole time.
• Loss-to-lease. A long-term tenant paying $1,150 against a $1,300 market rent is ~11.5% below scheduled market income. Sellers love to advertise the market rent and the full-occupancy history in the same flyer.

This is why a C-class building can truthfully report 3% physical vacancy and still be missing 12% of its scheduled income. When you read a seller's package, this gap is one of the seven standard tricks covered in how to read a rental property pro forma. Underwrite on economic vacancy. It's the version that pays the mortgage.

The turnover math: derive the number, don't pick it

A defensible vacancy assumption is just two estimates multiplied together:

Vacancy rate ≈ days vacant per turnover ÷ (average tenancy in days + days vacant)

Run the realistic scenarios:

• Good operator, B-class, 2-year average tenancy, 30 days to turn and re-lease: 30 ÷ 760 ≈ 4%
• Same property, 1-year tenancies: 30 ÷ 395 ≈ 7.6%
• C-class, annual turnover, 45 days to turn (more repairs, slower lease-up): 45 ÷ 410 ≈ 11%
• Student rental on a strict August calendar: often 1 month guaranteed-empty per year — 8.3% floor before anything goes wrong

Notice what drives the result: tenancy length, far more than days-on-market. Cutting re-lease time from 30 days to 20 saves you about a point; getting tenants to stay a second year cuts vacancy nearly in half. That asymmetry should shape how you operate — and it's the real reason renewals beat rent maximization for most small landlords. The vacancy rate calculator runs this turnover math both directions.

What 5 points of vacancy does to a real deal

A $300,000 duplex, $1,400/unit, 25% down, $225,000 loan at 7% over 30 years (P&I ≈ $1,497/month). Monthly operating expenses before vacancy: $300 taxes, $125 insurance, 10% maintenance/capex ($280), 8% property management ($224).

• At 5% vacancy ($140/mo): NOI ≈ $20,772/year, cap rate 6.9%, cash flow ≈ $234/month, DSCR (NOI ÷ debt service) ≈ 1.16
• At 10% vacancy ($280/mo): NOI ≈ $19,092/year, cap rate 6.4%, cash flow ≈ $94/month, DSCR ≈ 1.06

Five points of vacancy — the gap between "copied a guru default" and "C-class with annual turnover" — cut this deal's cash flow by 60%and dropped DSCR from acceptable to fragile. No other single assumption in the underwrite moves the answer this much per percentage point except rent itself. That's the entire argument for spending ten minutes on this line instead of zero.

And the duplex math has a wrinkle a single-family doesn't: vacancy arrives in 50% chunks. A "7% vacancy year" on a duplex is really one unit empty for seven weeks — $1,400 of missing rent concentrated in two months, not $98 missing evenly every month. Hold reserves accordingly. Stress-test your own numbers in the cash-on-cash calculator at both your base case and base-plus-five.

The DSCR loan wrinkle: your lender ignores vacancy

Here's the part that surprises investors using DSCR loans: most DSCR lenders qualify the loan on gross market rent ÷ PITIA — no vacancy haircut at all. The appraiser fills out a rent schedule (the 1007 form), the lender divides by your payment, and if the ratio clears 1.0-1.25 the loan works.

On the duplex above: $2,800 gross rent against roughly $1,922 of PITIA is a 1.46 lender DSCR — comfortably approved. But your own NOI-based coverage at 10% economic vacancy was 1.06. The lender's test says yes; the property's actual collected income barely covers the payment after real-world expenses. The gap between those two numbers is risk you carry, not the bank. Run both versions in the DSCR calculator before you treat an approval as validation of the deal.

Benchmarks by property class (sanity checks, not answers)

• A-class, stable metro: 4-6%. Long tenancies, fast lease-up, tenants with options who behave like it.
• B-class workforce housing: 6-9%. The bread and butter of small-portfolio investing; turnover roughly every 18-24 months.
• C-class: 8-12% economic — physical vacancy may look fine while non-payment and turnover costs eat the difference.
• Student rentals:8.3% structural floor (one guaranteed turn per year) plus whatever the summer market doesn't absorb.

The Census Bureau's national rental vacancy figure has hovered around 6-7% recently, but national averages blend markets that have nothing to do with each other. The better calibration source is free: call two local property managers and ask their average days-on-market and renewal rate for your property type. They know the real number because they live in it — and the same conversation helps you decide whether hiring a PM pencils at all.

Where to find the real number before you buy

For an occupied property, the truth is in the paperwork — ask for it during due diligence and read it like an auditor:

• The 12-month ledger, not the rent roll.A rent roll is a snapshot of scheduled rent on one day. The ledger shows what was actually collected, month by month. Sum the collections, divide by scheduled rent × 12 — the difference is the property's real economic vacancy, including every late month and concession the listing didn't mention.
• Lease start dates. Three tenants who all started within the last 8 months is a turnover pattern, not a coincidence. Ask what happened to the previous tenants.
• Days-on-market for comparable listings.Pull current rental listings in the same zip and note how long they've been sitting. Thirty-plus days across the comps means your 2-week lease-up assumption is fantasy.
• Two phone calls to local PMs. Ask their average days-to-lease and renewal rate for your property type and street, not the metro. Ten minutes, free, and more accurate than any national dataset.

One common modeling mistake: double-counting (or zero-counting)

Vacancy is an income-side adjustment — it reduces collected rent before operating expenses. Two errors show up constantly in homemade spreadsheets. First, investors using the 50% rule sometimes apply the 50% to gross rent andsubtract vacancy separately — but the classic 50% heuristic already includes vacancy, so they've counted it twice and killed a deal that pencils. Second, and worse, investors itemizing expenses (taxes, insurance, maintenance, PM) forget the vacancy line entirely because it isn't a bill anyone sends you — there's no invoice for an empty month. Pick one structure: either the heuristic with vacancy baked in for triage, or itemized expenses with an explicit vacancy percentage for the real underwrite. Never both, never neither.

How operators actually push vacancy down

Price 3-5% under top-of-market. The spreadsheet says squeeze every dollar; the turnover math says otherwise. On a $1,400 unit, holding out for $1,460 while the unit sits an extra three weeks costs more than the annual difference — and under-market tenants renew more.

Start renewal conversations at day 90. A signed renewal 60 days out converts your single biggest vacancy driver (turnover) to zero for another year. Modest renewal increases beat market-rate re-leases net of turn costs in almost every case.

Pre-lease during the notice period. Showing the unit in the last 30 days of a tenancy and turning it in under a week converts a 30-day vacancy into a 5-day one — worth nearly a point of vacancy rate by itself on annual-turnover properties.

Screen for tenure, not just credit. A 680-score applicant with five years at their last address is a better vacancy bet than a 740 who moves every year. The score protects against non-payment; the history protects against turnover. Both are vacancy.

FAQ

Put the number in context

Vacancy is one line, but it touches everything downstream — NOI, cap rate, cash flow, DSCR, and ultimately the verdict on the deal. The full TrueCap analyzer carries your vacancy assumption through all of it in one pass, so you can flip between 5% and 10% and watch the whole underwrite move. Related reading: how to underwrite a rental in 60 seconds, the 50% rule, and reading a pro forma.