Vacancy rate is a crucial metric for any landlord or real estate investor to track, as it can tell you about the health of your investment and how much rental income you may be missing out on. Whether you own a single-family home or several multifamily rental properties, keep reading to learn more about vacancy rate, what it means for your rentals, how to calculate it, and the best strategies for lowering it!
Summary:
Vacancy rate is the percentage of unoccupied units in a property or the percentage of the number of days a rental property sits vacant. Higher vacancy often means less revenue for a rental property investor, while lower vacancy often means higher revenue (vacancy is the opposite of occupancy).
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You can calculate your vacancy rate in one of two ways, depending on the type of rental property you own. For a multifamily property, divide your number of vacant units by the property’s total number of units. If you have a single-family home, divide the number of vacant days by 365.
You own a single-family home that has been rented out for the past three years. This July, when your tenant’s lease is expiring, they decide to move out. It takes you two months to turn over the unit and get a new tenant placed. July and August both have 31 days, leaving you with 62 vacant days. Now simply plug this number into the formula:
62/365 = 0.17 = 17% vacancy rate
A 17% vacancy rate may seem high, but let’s say you only had those two months of vacancy in the past three years. Take the 62 days of vacancy and divide it by three (roughly 21), and then recalculate:
21/365 = 0.058 = 5.8%
5.8% isn’t a bad annual vacancy rate!
While somewhat dependent on your market and the type of property you own, a healthy vacancy rate tends to hover around 5%-10%. Here’s what a vacancy rate outside this range might mean for your rental property:
Often, the higher your vacancy rate, the lower your revenue, as your unoccupied units aren’t generating any rental income (which could hurt your total cash flow). This could be due to several property- or market-related factors. You might be marketing your property poorly, or perhaps the rental itself isn’t up to par with other properties in your market. A higher vacancy rate might also be normal for your market, based on population and economic trends.
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The lower your vacancy rate, the higher your revenue usually is. This could be because you have a high-quality rental property with a high tenant retention rate. It could also mean that your market has high rental demand or limited supply. However, if your vacancy rate is too low, you might not be charging enough for rent!
What do “normal” vacancy rates look like today, and how does your own property’s rate compare? In 2025, the average rental vacancy rate in the US is roughly 7%, which is fairly average, but it is trending up—largely due to increased multifamily construction. However, we’re nowhere near 2008 levels, when we had a double-digit average vacancy rate!
Source: https://fred.stlouisfed.org/series/RRVRUSQ156N
The lower your vacancy rate, the more rental income you’ll likely earn—and chances are your tenants are happier, too! Here are several ways to reduce your property’s vacancy rate:
The term “turnkey” describes a newly built or renovated property that has property management and tenants in place. This type of rental property tends to boast lower vacancy rates, as a professional oversees the day-to-day, and there are already high-quality tenants occupying the units.
A good tenant may stay at your property for many years, lowering your vacancy rate. On the other hand, a bad tenant could stop paying rent after a few months (and potentially damage your property), leaving you with huge turnover costs. Screening tenants properly and legally can be difficult for a new investor, but a professional property manager can help with this!
If you want to lower your vacancy rate, work to increase tenant retention. Beyond providing a great renting experience year-round, good landlords will often reward their best tenants upon lease renewal. You could incentivize them to stay with something as simple as replacing an old toilet, putting in a backsplash, or adding a more modern ceiling fan.
Overpricing your rental can lead to weeks or months of vacancy, while underpricing it may cause you to attract suboptimal tenants. Using a professional property manager to comp rents in your area can get you a great tenant faster and lead to them staying longer.
Interested in hands-off rentals? Our turnkey rental properties come with property management in place!
If your property is outdated or poorly maintained, you’ll struggle to attract and retain top tenants. Boosting your property’s curb appeal, adding desirable amenities, and renovating older units could help you not only lower your vacancy rate but also charge higher rent!
If you want a lower vacancy rate, buy a recently updated rental property in a market with high rental demand—like a turnkey property!
At Rent to Retirement, we have new build investments and renovated properties in some of the best places to buy rental property in the US. Plus, you won’t have to worry about finding, screening, or retaining great tenants, as a professional handles it all for you. We also offer 5%-down financing and incentives that could allow you to buy a rental property with $0 down!
In real estate investing, vacancy rate can mean one of two things: the percentage of unoccupied units within a multifamily property or the number of days per year that your single-family home is vacant.
While it ultimately depends on your property and market, a 5% vacancy rate is considered relatively low. Many investors use an 8% vacancy rate as a benchmark since it represents one month of the year.
Many investors aim for a 5%-8% vacancy rate. If your vacancy rate is too high, you’re likely losing rental income. If your vacancy rate is too low, your rentals might be underpriced!