Vacancy is the silent killer of rental returns. A property with $1,500 monthly rent loses $1,500 for every month it sits empty, and it usually takes another $500 to $1,500 to turn the unit (cleaning, paint, touch ups, showings). One extra vacant month a year drops your annual return by 8%. Most investors underwrite deals assuming 5 to 8% vacancy, but reality varies wildly by market, tenant quality, and PM aggressiveness. Section 8 properties in stable Birmingham neighborhoods can run 2 to 4% vacancy. Class C properties with frequent evictions can run 15 to 20%. Short term rentals in seasonal markets can hit 40 to 60% low season vacancy. Track actual vacancy per property, not market average, and be honest with yourself when you underwrite. A deal that only cash flows at 5% assumed vacancy probably does not cash flow at the real 10% you are going to experience.
Example
A unit was available to rent for 365 days and was vacant for 18 days between tenants. Vacancy rate = 18 / 365 = 4.9%.