Vacancy is invisible in pro-formas that want to impress you. Yet it is the most honest line in any rental analysis: rent you don't collect is simply not income, and every metric downstream, EGI, NOI, yield, DSCR, cash flow, inherits whatever vacancy you assumed.
Where vacancy comes from
- Turnover gaps: days between tenants for cleaning and repairs.
- Marketing time: how long the unit sits listed at market rent.
- Seasonality: many markets have slow quarters.
- Non-payment events: the tail risk every landlord eventually meets.
Choosing an assumption you can defend
Ask for the property's (or the seller's) actual occupancy history, not their memory of it. Look at comparable units' listing duration today. Then pick a number that survives a bad year, not an average one: the difference between assuming 3% and 8% vacancy on a $2,400/month unit is over $1,400 of annual income you may never see.