Property Management Blog

What is a Vacancy Rate and Why is it Important? Indianapolis Property Management Education

David Treat - Monday, February 29, 2016

Put simply, the vacancy rate is the number of days that a property is not producing income, due to the fact that there isn’t a tenant in it, divided by 365. The vacancy rate is used in a number of ways, such as to determine cash flow.

Low Vacancy Rates

Your property’s vacancy rate can also tell you about your rent levels and whether the price is set properly. If the vacancy rate is too low, it could indicate that the rent isn’t high enough to maximize your overall revenue. A vacancy rate that’s too low might also tell you that you need to spend more time with the screening and leasing process.

High Vacancy Rates

If vacancy rates are too high, there could be inefficiencies in the rental process. The rent might also be set too high. When it takes you too long to rent a property to a good tenant, you might need to look at your rental application and the amount of time you’re spending with the processing, screening and execution of the lease. It’s important to have an efficient rental process so you can get those vacancy rates lower. An online process can often help you reduce those inefficiencies. With a high vacancy rate, you might also want to complete a rental analysis to set rent at a proper market level. Remember that the time of year that you’re marketing your property – summer or winter – can often impact the price that tenants are willing to pay.

If you need help looking at your vacancy rate, or you think it might be too high or too low, please contact us at ES Property Management, and we would be happy to make some recommendations.