How To Calculate Rental Vacancy and Credit Loss
By James Kimmons, About.com Guide
- Determine an expected percentage of loss due to vacancy and non-payment by checking that of comparable properties and the recent loss experienced by the subject property.Last year’s vacancy and credit loss from the subject property may have been 3% of net operating income. Other comparable properties experienced an average of 4%. Choose a value in the mix, let’s say 3.60%.
- Adjust your net operating income for next year by any anticipated rent increases. If you are anticipating a 5% increase in rent, and net operating income this year is $44,000, then:$44,000 X 1.05 = $46,200
- Calculate the expected monetary loss for next year due to vacancy and credit losses:$46,200(net operating income) X .0360 (3.6%) loss estimate = $1663.20.
What You Need
- Calculator
- Some estimate(s) of vacancy and credit loss percentages
Source: James Kimmons, About.com Guide http://realestate.about.com/od/knowthemath/ht/vacancy_loss.htm
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