How do you forecast your vacancy and occupancy rates for budgeting and planning purposes?

1 What are vacancy and occupancy rates?

Vacancy rate is the percentage of units that are unoccupied or not generating income in a property or a portfolio. Occupancy rate is the opposite, the percentage of units that are occupied or generating income. These rates are usually calculated on a monthly or annual basis, and can be compared to historical data, market trends, or industry benchmarks.

2 How to calculate vacancy and occupancy rates?

To calculate vacancy and occupancy rates, you need to know the number of units in your property or portfolio, as well as the number of units that are vacant or occupied at a given time. The vacancy rate is calculated by dividing the number of vacant units by the total number of units and multiplying by 100. The occupancy rate is calculated by dividing the number of occupied units by the total number of units and multiplying by 100. For example, if you have 100 units in your property, and 10 of them are vacant, your vacancy rate is 10% and your occupancy rate is 90%.

3 What factors affect vacancy and occupancy rates?

Vacancy and occupancy rates are influenced by a variety of internal and external factors, such as the balance between demand and supply, the location and amenities of the property, the price and quality of the units, and the marketing and leasing strategies. When demand is high and supply is low, vacancy rates tend to be lower and occupancy rates higher. Similarly, properties close to public transportation, schools, shops, and other amenities have lower vacancy rates and higher occupancy rates than those that are isolated or lack features. Additionally, properties that are priced too high or too low for the market, or that have poor maintenance or management often have higher vacancy rates and lower occupancy rates than those that offer value and quality. Lastly, effective marketing and leasing campaigns such as online advertising, referrals, incentives, and tenant screening can result in lower vacancy rates and higher occupancy rates.

4 How to use vacancy and occupancy rates for budgeting and planning purposes?

Vacancy and occupancy rates are invaluable for budgeting and planning purposes, as they help you determine your income and expenses, as well as adjust your marketing and leasing strategies. For instance, you can multiply your occupancy rate by your average rent per unit to project your expected rental income for a given period. Additionally, you can multiply your vacancy rate by your average cost per unit to calculate your expected vacancy loss. Lastly, you can compare your vacancy and occupancy rates to your goals and benchmarks, and adjust your marketing and leasing strategies accordingly. For example, if your vacancy rate is higher than expected, you may need to lower the rent or offer incentives; if the occupancy rate is lower than desired, you may need to raise the rent or reduce incentives.

5 How to improve your vacancy and occupancy rates?

Property managers face the ongoing challenge of improving their vacancy and occupancy rates, and this requires monitoring, analysis, and action. To achieve this, market research should be conducted to stay updated on market conditions, trends, and competitors in the area. Regular inspections of units, common areas, and facilities should also be performed to maintain quality and appeal and prevent tenant dissatisfaction or turnover. Communication with tenants is important to build rapport and loyalty, while rewards for loyalty, referrals, or timely payments can help retain tenants and attract new ones.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?