How are vacancy costs typically calculated?

Vacancy costs are typically calculated by evaluating lost income due to vacancies. This method focuses on the income that would have been generated if the units were occupied. When a rental property has vacancies, the owner does not collect rent for those units, leading to a direct loss in potential income. By quantifying this lost income, property managers and owners can get a clear picture of the financial impact of vacancies on their overall revenue.

In contrast, estimating potential rental income does not accurately capture the costs related to vacancies, as it does not account for when units are unoccupied. Multiplying the number of vacancies by maintenance costs also misrepresents vacancy costs, as maintenance may not be directly affected by the number of vacancies. Lastly, assessing the market rate for occupied units provides useful information about the potential profitability of the units but does not directly measure the impact of current vacancies on income. Overall, evaluating lost income gives the most accurate reflection of the costs associated with unoccupied rental units.