Vacancy & Credit Losses
Learn how to calculate your Vacancy and Credit Losses for your Rental Properties.
What are Vacancy & Credit Losses?
Vacancy and credit loss allocations are used to account for anticipated income lost due to tenants vacating the property and/or tenants defaulting on their lease payments.
Generally, it's good practice to assume you will tenant turnover every year, and that it will take one month to find a new tenant and get the property rented.
Generally, it's good practice to assume you will tenant turnover every year, and that it will take one month to find a new tenant and get the property rented.
How to CALCULATE VACANCY & CREDIT LOSSES?
Vacancy losses are calculated either by a percentage of the Gross Potential Income or on a monthly basis.
Vacancy Loss on a Monthly Basis
As an Example , let's assume we have a property that we are renting for $1,250 per month or $15,000 per year.
As suggested above, let's assume that we will have tenant turnover every year and will need one month to find a new tenant and get the property rented.
In this scenario, we will lose one full month of rent of $1,250, so our vacancy loss for the year is $1,250.
Vacancy Loss as a % of Gross Scheduled Income
In the example above, we assumed a vacancy loss of one full month which amounted to $1,250 of our $15,000 in annual rents.
We can use this dollar amount to derive the Vacancy loss % for the property.
$1,250 / $15,000 = 8.33%
The example below shows how the Vacancy Loss Calculation would be calculated using our Free Rental Property Spreadsheet.
Vacancy Loss on a Monthly Basis
As an Example , let's assume we have a property that we are renting for $1,250 per month or $15,000 per year.
As suggested above, let's assume that we will have tenant turnover every year and will need one month to find a new tenant and get the property rented.
In this scenario, we will lose one full month of rent of $1,250, so our vacancy loss for the year is $1,250.
Vacancy Loss as a % of Gross Scheduled Income
In the example above, we assumed a vacancy loss of one full month which amounted to $1,250 of our $15,000 in annual rents.
We can use this dollar amount to derive the Vacancy loss % for the property.
$1,250 / $15,000 = 8.33%
The example below shows how the Vacancy Loss Calculation would be calculated using our Free Rental Property Spreadsheet.
Download our Free Rental Property Spreadsheet to Calculate your Rental Property Vacancy Losses and Analyze the Rental Cash Flow for your Rental Properties.
