Operating expenses
Vacancy Reserve
Reserve for months without a paying tenant. Typically 5–8% of gross rent, depending on the market.
Why Vacancy Reserve matters
Vacancy is the most-under-budgeted line item in new-investor underwrites. Real vacancy is 6-10% in most markets, NOT the 3% the listing pro-forma shows. Even a single 30-day turnover = 8.3% vacancy for that year.