Vacancy rate is an essential metric for real estate investors to understand, and it refers to the percentage of units in a building or area that are currently vacant. Calculating the vacancy rate in a particular building is pretty simple – take the number of vacant units, multiply it by 100 and divide that figure by the total number of units.
But it may also be helpful for real estate investors to know the average vacancy rate for a particular area. This can be useful for determining if purchasing a rental property in a specific city or neighborhood will be a good investment. But this is a bit more complicated than doing a simple calculation. Here is a look at how to find vacancy rates in a particular area.
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How to Find Vacancy Rate in Any Area
1 – Work with a Real Estate Agent: Brokers are often a good source of real estate-related data, including the average vacancy rate of a particular area. Suppose you have a good relationship with a specific agent. In that case, you could ask them to analyze the local market and pull together statistics you can use to calculate the rough average vacancy rate. Much of this data is available on the MLS and can be used to give you a fair estimation of how often there are vacancies and how long the average rental tends to be vacant.
2 – Talk to Other Landlords: Another approach is getting the info directly from the horse’s mouth. Try calling up local landlords and asking them if they know the average vacancy rate. They may know it off the top of their heads, or they may at least be able to supply you with enough data on their own buildings to make a rough guess. You may have to build a relationship with them first – cold-calling random landlords without an introduction may lead to many rejections. But if you have relationships with other investors in the area, it can’t hurt to reach out.
3 – Contact Property Managers: Property managers are another useful source for finding information on vacancy rates. After all, they manage the units and take stock of any vacancies, so they would know best. Most property managers keep accurate records of how many vacant units are at a particular time. Plus, they may manage buildings all over town. So, they could have an insight into particular neighborhoods and districts, as well as the area as a whole.
4 – Census Data: Another good resource is the US Census Bureau. They track the vacancy rates of many of the largest markets in the country and other important metrics on population. This may not be feasible if you’re looking in a smaller city or a particular neighborhood, but it can always be used as a good reference point to compare with the other methods.
What is the Average Vacancy Rate for Rental Properties in the US?
The average vacancy rate for rental properties in the US varies from year to year. According to the St. Louis Federal Reserve, the average vacancy rate in the country in the fourth quarter of 2021 was 5.6%. This was down from 6.8% in the first quarter of the year.
The highest vacancy rate on record in the US came in the third quarter of 2009 when it shot up to 11.1% during the height of the housing crisis. The lowest it’s ever been was in 1981 when it hovered around 5% for the entire year.
While general economic conditions impact the vacancy rate, it also varies significantly from market to market. So, while the US average may be around 5.6%, a particular city could have an entirely different outlook.
What is a Good Vacancy Rate in the US?
There is no set standard for what is considered a good vacancy rate, but the lower, the better. However, it’s virtually impossible to have a vacancy rate of 0%, at least for an extended period of time, because there will always be some turnover. So, for the US as a whole, a 5-6% vacancy rate seems to be a good sign that the housing market is strong.
This may vary depending on the particular market and the type of property. But in general, most investors like to see vacancy rates in the single digits unless they are marketing luxury properties that are only available to a select few. That’s why it’s essential to do your homework and determine the average vacancy rate in the area you’re exploring, so you know what to expect.