If a duplex generates $1,200 in rent monthly, what is the vacancy factor percentage for the investment property?

To determine the vacancy factor percentage for the investment property, it's important to understand what the vacancy factor represents. The vacancy factor is a percentage of the rental income that is typically expected to be lost due to vacancies. It is used by investors to calculate potential income and make informed decisions about profitability.

In the context of a duplex generating $1,200 in rent monthly, the vacancy factor can be calculated by assessing typical market trends within the area. A realistic vacancy percentage is often derived from local rental market studies or historical data, which are generally considered to range anywhere from 10% to 25% depending on location, demand, and the condition of the property.

Choosing a vacancy factor percentage of 25% suggests a cautious investor approach, reflecting potential challenges in maintaining full occupancy. This figure acknowledges factors such as seasonal vacancies, market fluctuations, or economic downturns that might affect the rental property’s ability to remain fully rented. Thus, this higher vacancy percentage takes into account a more conservative and realistic estimate of what might be experienced over time, especially in fluctuating rental markets.

By utilizing a vacancy factor of 25%, the investor can better prepare for potential income losses, ensuring that they set aside adequate reserves while analyzing the property's cash flow and overall financial viability