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How To Determine an Area’s Vacancy Rate

When looking to purchase a single-family rental property, one of the most important numbers you need to make a smart decision is the area’s vacancy rate. A vacancy rate is the percentage of rental homes that are unoccupied. It is in one sense an average of the nearby available rental homes at any given time. There are many ways to calculate a particular area’s vacancy rate, but the most common methods include using census data, asking local real estate professionals, or contacting local property management professionals.Hands reviewing documents to determine vacancy rate

Census Data

One of the functions of the U.S. Census Bureau is to track vacancy rates in various markets around the country. It is possible to download the raw data provided by the census and analyze it to determine the vacancy rate for a particular area. However, there are a few drawbacks to this method. For example, the vacancy rates tracked by the Bureau include only the largest 75 markets, which leaves quite a bit of the country out of the picture. What is more, the data is not specific enough to allow you to calculate the vacancy rate for individual neighborhoods. Most investors know that sometimes moving just a block or two in any direction can dramatically change a property’s expected vacancy rate. For this reason, census data is a helpful tool, but may need to be used in combination with other methods.

Real Estate Professionals

It goes without saying that real estate brokers and agents know a lot about their local real estate markets. If there are real estate professionals in your area who routinely lease rental homes, you might try asking them for a comparative market analysis on the local rental market. What this market analysis can tell you is how long properties tend to sit vacant before being leased, the differences between listed rental rates and actual rental rates, and more. From this information, you can then determine an average vacancy rate for a certain location.Man and woman in living room determining vacancy rate.

Property Management Professionals

Perhaps one of the best ways to get an area’s vacancy rate is to contact a local property management professional and ask them. If they are true experts in their field, a property manager should either already know an area’s vacancy rate or be able to determine it for you right away. What is more, property management professionals tend to have more specifics about neighborhoods and even certain streets, helping you get a far more accurate vacancy rate than the other two methods may produce. Finally, a property management professional can often provide additional information about a location that may factor significantly into your decision-making process.

Areas with high vacancy rates may indicate problems with demand, and that your new rental property is more likely to sit vacant for longer periods. For this reason, most investors look for areas with a below-average vacancy rate. As an investor, you need accurate, reliable numbers for each property you consider buying. Are you in the market for your next rental property investment? If so, contact your nearest independently owned and operated Real Property Management franchise office. We can do a free rental property evaluation on your next rental property before you buy so that you can do so with confidence.


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