Vacancy/Occupancy Rate Calculation
For any rental property, vacancy rate plus
occupancy rate equals 100 percent. Sellers like to use
occupancy rate because it sounds more positive, but as you calculate
NOI, Cap Rate and postpurchase strategy, you'll need both of these
numbers. Here is how to calculate a solid vacancy rate and
convert it to occupancy rate.
STEP 
CALCULATING VACANCY & OCCUPANCY RATES 
1 
Obtain rent
roll information for a year or more from your
prospective property. Count vacancies and units
available. It is better to do the
counting yourself rather than letting the seller or the
seller's agent do the counting. There are many
assumptions possible, and if you know what they are, you
can decide what to do about them, rather than letting
someone else decide for you. For example, what if
one building of a community was made vacant for
renovations? You would probably not include those
units in your calculations for the time the renovations
were underway. What if the seller's aunt lived in
an apartment and didn't like to hear neighbors, so all
adjoining apartments were kept vacant? You would
probably count those units. What if one unit is
used as an office for the community? You would
probably not count that unit. And, so on. 
2 
It is best to reduce your
numbers to the most elemental levels. If rents are
paid monthly, count vacant units by the month. If
biweekly, count biweekly. Let's assume rents are
collected monthly for your prospective property.
For each month in your 12 month collection of rent
rolls, count the number of units that were potentially
available, and the number of units that were vacant
(vacant & ready, in turnaround, off line). You can
set up your data sheet this way:
EXAMPLE:
MONTH 
UNITS
AVAILABLE 
UNITS VACANT 
NOTES 
1 
16 
5 

2 
16 
4 

3 
16 
3 

4 
16 
4 
Water
heater leak in unit 6; water damage in 2 
5 
16 
1 

6 
16 
0 

7 
16 
0 

8 
16 
2 

9 
16 
0 

10 
16 
1 

11 
16 
2 

12 
16 
3 

TOTALS 
192 
25 
 

3 
Lets assume
you are looking at a 16plex apartment building.
There are 16 units available for rent You have
calculated that, over the course of a year, there are 16
X 12 = 192 unitmonths available. That is, there
are 16 units available each month, and over a 12 month
period, there are 192 unitmonths available. 
4 
Now add up
the vacant units, by month, over the 12month period.
Let's assume you calculated there were 25 vacant
unitmonths. That is, the number of units that
were available for rent each month, but were not rented,
over a 12 month period, was 25. 
5 
Calculate
vacancy rate:
EXAMPLE: 25 / 192 = 0.13 OR
13% 
6 
Calculate
occupancy rate:
EXAMPLE: 100% 
13% = 87% 
7 
Armed with a
realistic vacancy rate, you can calculate NOI, Cap Rate,
estimate the growth potential for your prospective
property, gain an insight into maintenance and
turnaround costs and decide if you need to investigate
why the vacancy rate is where it is. 
