Contents

Introduction....…......…............……1

Vacancy Definition......................…2

How the Rental Vacancy Factor is

calculated..........................................2

A Powerful Tool..…........................3

Establishing a Rental Vacancy Factor

If you buy a property to rent out and thereby

cover your repayments, it is important not to

assume that it will be fully occupied. This is

because no property ever is, and yours is unlikely

to be the sole exception. Speculators base their

estimated rental income on the average rates of

vacancy for an area over time – this is called the

rental vacancy factor.

2

How the Rental Vacancy Factor is Calculated

The factor is an expression of the percentage of all units in an area that are unoccupied during a

specific period. These rates can change from time. Hence, it is better to examine trends, as opposed to

a single point in time.

Interpreting the Result

Property rental factors are an expression of the ratio between

supply and demand, as are most things in business. However, the

quantum of the average rental affects the ratio too. An area with a

high vacancy rate indicates that either average rental is too high for

the market to stand, or that some other factor is chasing tenants

away. It is essential to interpret this correctly.

A “vacancy” is the period when a property is standing unoccupied,

or, otherwise, not receiving rent. It could be up for sale, or waiting

for a tenant to sign a lease and move in. There are two subsets. A

Market Vacancy is the number of units open to rent. Economic

Vacancies are occupied properties not yielding direct income, for

example, show houses and manager’s homes.

A Definition of “Vacancy”

3

A Powerful Tool

Used with insight, a rental factor is a powerful tool in the hands of

any property investor searching for opportunities on

ForeclosureDataBank.com - whether buying to occupy, or for

renting out. This because it is a superb way to estimate return on

capital over time, and return on capital is what investment is all

about.

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It can also disclose that people are moving away from the area,

and that, if there ever was, is a warning sign to note.