Vacancy rate: What it is and how to calculate it

If you’re thinking of investing in a rental property, understanding vacancy rates is essential. Vacancy rates show how many units in a property are rented and how many are empty. They also indicate whether a property is operating efficiently and provide data about its future earning potential. Learn what vacancy rate means, how to determine vacancy rate for a single property and a portfolio, and how to compare your numbers to market data.

What is a vacancy rate?

Vacancy rate – sometimes called a physical vacancy rate – is the percentage of units in a rental property that are unoccupied over a given period.

Vacancy rates are the inverse of occupancy rates.

A higher vacancy rate suggests a property may have problems such as outdated units, weak management, a poor location, or overpriced rent. Low vacancy rates suggest a rental property is in demand, well-run, affordably priced, and generates steady income.

How to determine vacancy rate

There are two ways to calculate a property's vacancy rate. One calculates the percentage of unoccupied units in a building, and the other shows the percentage of time units have been vacant.

By unit count

For the percentage of unoccupied units in a building, the formula is:

Vacancy rate = (vacant units / total units) x 100

For example, if an apartment building has 11 vacant units out of a total of 120, the vacancy rate is:

(11 / 120) x 100 = 9.2%

By time vacant

For the percentage of time a unit has been vacant, the formula is:

Vacancy rate = (vacant days / available days) x 100

Say a single rental unit was vacant 23 days out of the year:

(23 / 365) x 100 = 6.3%

In many balanced markets, vacancy rates between 5% and 10% are considered typical, though this varies by location.

Vacancy rate for portfolios or multi-unit properties

What if you own or are interested in investing in a multifamily building or a portfolio of units and want to assess their vacancy rate in aggregate? Easy. Just total the number of vacant days across all units and divide by the number of total rentable days.

Here’s an example of what that might look like:

In this case, your calculation would look like this:

114 ÷ 1,280 = 8.9%

Current residential vacancy rate trends

For many years, the national residential vacancy rate has been creeping up slightly year to year.

As of the first quarter of 2026, the national rental vacancy rate stands at 7.3%, an increase from 7.1% in the same quarter of 2025. This is not statistically different, but despite the vacancy rate being well below 10% nationally, it suggests a growing supply.

Of course, these are national averages. The vacancy rate can change from state to state and county to county. So, it’s important to do your homework on local market vacancy rates and economic conditions to get a clear picture of your investment.

What high vacancy rates may indicate

Acceptable vacancy rates can vary by region, market conditions, and other factors, but a healthy vacancy rate is typically between 5% and 10%. So, what does a high vacancy rate mean?

It could point to problems with the overall market, of course, and signal that demand is far below supply. However, if your property has higher vacancy rates than those in your region, it could point to problems specific to your property.

For instance, it could be as simple as a marketing or advertising issue. It could also indicate outdated or unappealing units that need renovations, or that the units are overpriced for the current market.

What low vacancy rates may indicate

Low vacancy rates usually indicate a strong market, with rental demand outstripping supply. They could also mean a property is well-managed and desirable. Landlords might have more options for well-qualified tenants.

Low vacancy rates, in tandem with good management, could also indicate that a property is maximizing profitability, making it an attractive investment. Conversely, an extremely low vacancy rate could mean you're leaving money on the table because units are underpriced or supply is constrained.

Understanding and calculating the economic vacancy rate

There is another type of vacancy rate that many investors view as an even better indicator of a property’s investment potential and likely profitability. That’s the economic vacancy rate.

High vacancy contributes to vacancy loss (lost potential rent) and can reflect higher turnover, both of which affect net operating income.

The economic vacancy rate measures the difference between a property's gross potential rent (GPR) and its actual rental income. The advantage is that the economic vacancy rate considers factors beyond mere vacancy numbers.

For instance, the economic vacancy rate includes units that are occupied but not generating rent, such as property manager units, promotions like free weeks or months of rent for new tenants, and unrealized income from units rented at market rates.

So, to calculate this, use this formula:

Economic vacancy rate = (gross potential rent – actual rental income) / gross potential rent x 100

Here’s an example:

Let’s say a property has 100 units with an average rent of $2,000. The market rent for the area is $2,100. Further, there is one unit for the property manager, who pays no rent, and seven vacant units.

The gross potential rent for the building is $2,100 x 100 = $210,000

The actual rental income is $2,000 x (100 - 8) = $184,000

Economic vacancy rate = ($210,000 - $184,000) / $210,000 x 100 = 12.38%

What market vacancy rate tells investors

The market vacancy rate reflects the average percentage of unoccupied rental units in a specific region. It can put your property’s vacancy rate in context and help you make decisions about buying, selling, renovating, and more.

Where to find market vacancy rate data

• U.S. Census Bureau’s housing data
• Local government websites
• Real estate agents and property managers
• U.S. Census Bureau Housing Vacancy Survey
• Federal Reserve Economic Data (FRED)

What high market vacancy rates can tell you

A high market vacancy rate could indicate an excess of rental units in the area, suggesting that supply outpaces demand. These market conditions could be risky for investment. Knowing this could also give you negotiating leverage.

What low market vacancy rates can tell you

Low market vacancy rates suggest a strong housing market with high demand and limited supply. This environment could be safer for investment. Of course, the sellers also understand this, which could make it tougher to score an undervalued property at a bargain price.

The bottom line: Use vacancy rates to make smarter investments

Vacancy rates are more than just simple calculations. They give you valuable insights into whether a rental property is a good investment, involves financial risk, and requires work to become profitable.

While a property's vacancy rate is one of several metrics successful investors use to evaluate prospects, its ease of use, combined with its importance as information, makes it a powerful one.

If you’re interested in building wealth through rental real estate, explore financing options with Rocket Mortgage.