The number that kills rental property returns
Vacancy is the silent destroyer of rental property cash flow. Every marketing pitch for a rental — the pro forma from a listing agent, the spreadsheet from a syndicator, the "this house cash flows $400/month!" Instagram post — assumes 100% occupancy. Real life delivers 88–93%. That 7–12% gap between fantasy and reality is usually the difference between a property that makes money and one that breaks even.
This calculator forces you to confront the real number. Enter your monthly rent, your realistic vacancy rate, your monthly operating expenses, and your turnover costs. The output tells you what the property actually generates after lost rent and the cost of repositioning it between tenants.
Where the vacancy actually comes from
Vacancy is usually thought of as "months between tenants." In reality it has four components, and ignoring any of them understates the true impact:
1. Turnover gaps.When a tenant moves out on the last day of the month, the next tenant rarely moves in on the first day of the next. Cleaning, painting, and showing take time. The typical gap is 2–4 weeks. Across a 2-year tenancy, that's ~4–8% annual vacancy from this source alone.
2. Rent concessions."First month free" or "$500 off move-in" is essentially vacancy loss — you're giving up a month (or partial month) of rent to attract the tenant. In soft markets, concessions add 1–3% to your effective vacancy rate.
3. Non-payment. Some tenants stop paying. In a landlord-friendly state, eviction takes 30–45 days. In California, New York, or New Jersey, eviction can take 6–12 months, during which you collect nothing but still pay the mortgage. One non-paying tenant can wipe out two years of cash flow.
4. Deliberate vacancy.You might choose to leave a unit empty to renovate, to accommodate a sale, or to avoid a bad-fit tenant. This is voluntary but still hits the P&L the same way.
What a 5% vacancy really costs
5% vacancy on $2,200/month rent sounds trivial — "less than a month empty per year." But that's $1,320 of lost revenue annually while expenses are still running. If your monthly operating expenses are $1,450 (mortgage + taxes + insurance + maintenance), you're paying that during vacant months too. Actual bottom-line hit is the $1,320 of lost rent PLUS about $600 of expenses during the empty month that would have been covered by rent = roughly $1,900 of lost net income.
Now run 10%. That's $2,640 in lost rent plus $1,200 in uncovered expenses = $3,840 of lost net income. On a rental producing $8,000 in net income at full occupancy, a 10% vacancy rate doesn't just shave a little — it destroys nearly half the cash flow.
This is why disciplined investors price conservatively and underwrite with 8%+ vacancy assumptions. A deal that works at 8% vacancy generally works; a deal that only pencils at 0% vacancy is an accident waiting to happen.
Turnover costs: the expense line nobody budgets for
Beyond lost rent, every tenant turnover triggers a cost event. For a typical 2-bedroom rental:
- Cleaning: $200–$400 for a deep clean between tenants.
- Paint: Touch-up is free; full repaint is $800–$2,000 every 3–5 years.
- Carpet: Clean at $150–$300, replace at $1,500–$3,500.
- Small repairs: $200–$600 for nail holes, broken blinds, worn appliance parts.
- Listing and showing: $100–$300 for photos, listing fees, and your time.
- Agent leasing fee: 50–100% of one month's rent if you use a broker.
Conservative budget: $1,200 per turnover. If your average tenancy is 2 years, that's $600/year of turnover costs. If your tenants roll every year (a common reality in the first five years of ownership), that's $1,200/year.
How to reduce vacancy
Price slightly below market.The single highest-ROI vacancy tactic. If the market rent is $2,200 and you price at $2,175, you'll fill faster. The $25/month discount is $300/year — much less than the cost of an extra three weeks of vacancy. Most landlords over-price, hold out for their number, and then accept a tenant at the lower number anyway three weeks later.
Pre-market aggressively.Start showings 30 days before the current tenant moves out. Most leases allow this. You can often find a new tenant who'll move in the day after the current one leaves, eliminating the gap entirely.
Retain good tenants.A 2-year tenant is worth 3–5x more than a 1-year tenant because you avoid turnover costs and vacancy. Offer a small rent increase (3–4%) on renewal instead of market-rate (5–8%). The $300–$600/year "concession" is much cheaper than a turnover.
Screen fast and well.A 24-hour turnaround on applications moves applicants from your listing to your lease before they tour the competition. But don't sacrifice screening quality for speed — one bad tenant destroys years of cash flow. Credit, income verification, and landlord references are non-negotiable.
Move-in-ready photos. Professional photography and a clean, staged showing is the cheapest vacancy-reducer available. $200 for photos saves $500 of extra vacancy. Absolutely worth it.
The market-cycle effect on vacancy
Vacancy is cyclical and correlated with employment. In a growing metro with falling unemployment, vacancy often drops to 3–4% and you can push rents aggressively. In a contracting market, vacancy can spike to 12–15% in a matter of months, and rent concessions become standard.
If you're underwriting a deal, don't use today's vacancy rate — use the 10-year average for the specific submarket. Rentometer, Apartments.com, and local market reports publish submarket-level vacancy data. If you're in a market that ran at 4% during a boom, plan for 8–10% during the next downturn.
Vacancy in short-term rentals vs. long-term
Short-term rentals (Airbnb, Vrbo) don't have "vacancy" the same way. They have occupancy rate, which is typically 50–65% annually (30–40% of nights empty). The nightly rate premium has to cover all those empty nights plus much higher turnover costs (cleaning between every stay, not every two years).
In most markets, an STR at 60% occupancy generates less net income than the same property as an LTR at 92% occupancy. STRs win in high-tourism markets with 3x+ nightly-vs-monthly rent ratios (Lake Tahoe, Kauai, Vail, Destin). They lose in ordinary residential markets. Use our Airbnb income calculator and rental yield calculator to compare.
Related tools
Run full rental yield math in our rental yield calculator. Compare cap rate across deals in our cap rate calculator. See your investor return in our cash-on-cash return calculator.