$500 a month of unpaid rent takes this full fourplex from $849 to $349

A building can be full and still come up short. Every unit lived in, every lease signed, and the deposits are lighter than the rent roll says they should be. Economic vacancy is the number that catches that gap. Physical vacancy walks straight past it.

What is economic vacancy?

Economic vacancy is the share of your scheduled rent that never reaches the bank.

Scheduled rent, sometimes called gross potential rent, is what a building would collect with every unit let at its asking rent for twelve straight months. Economic vacancy compares that figure with what you actually banked:

Economic vacancy = (scheduled rent − rent collected) ÷ scheduled rent

A fourplex with $6,300 a month on the rent roll has $75,600 of scheduled rent in a year. Bank $65,000 of it and economic vacancy is 14%, and the number does not care whether the shortfall came from an empty unit, a free month you offered to get a lease signed, or a tenant who paid late in March and not at all in April.

How is economic vacancy different from physical vacancy?

Physical vacancy counts units with nobody in them, and nothing else.

That is how the Census Bureau measures it. The Housing Vacancy Survey’s definitions say a housing unit is vacant “if no one is living in it at the time of the interview, unless its occupants are only temporarily absent,” and that the rental vacancy rate is “the proportion of the rental inventory which is vacant for rent.” The test is whether somebody lives there, not whether the rent arrived. In its release of October 28, 2026, the Census Bureau put the national rental vacancy rate at 7.6% in the third quarter of 2026.

So physical vacancy is one line inside economic vacancy, and on a well-run building it is often the smallest one. What vacancy rate to use covers the turnover side on a single house.

Where does the missing rent go?

Six lines, and only the first is physical.

• Turnover. The days or weeks between one tenant handing back the keys and the next one paying.
• Concessions. A free first month, or $100 off the asking rent to get a lease signed in a slow season.
• Late rent and bad debt. Rent that lands after the month closes, or never lands.
• Loss to lease. Units let at $1,450 while today’s asking rent is $1,575. The rent roll shows the lease, and the market shows the gap.
• Non-revenue units. A unit the resident manager lives in, or one kept furnished as a model to show.
• Fee and utility income you assumed and did not collect.

A seller’s rent roll shows the leases. None of the other five appear there unless you ask for them.

What does it do to a real building?

The arithmetic is easier to see on one building than in the formula.

This example is a fourplex at $499,000 with four units let at $1,575 each, so $6,300 a month of scheduled rent. It carries $6,400 of property taxes and $3,600 of insurance a year, $450 a month for water, sewer, trash and the hall lights, 10% of rent set aside for repairs and big repairs, and 8% of rent for a property manager. The loan is 20% down on a 30-year mortgage at 7%, and the vacancy allowance is 6% for turnover.

These are example figures, not a forecast for any market.

Now add $500 a month of concessions and late rent, with all four units lived in the whole time. That is 7.9% of the rent roll on top of the 6% turnover allowance, so economic vacancy is 13.9%.

Nothing about the building changed. Four tenants, four signed leases, and 59% less cash flow.

What does economic vacancy do to the rest of the numbers?

It comes off every return at once, because it comes off the income before anything else does.

• NOI falls from $42,056 to $36,056 a year. Net operating income is what the building earns after running costs and before the mortgage. How to calculate NOI works through it line by line.
• The cap rate falls from 8.4% to 7.2%. Turned around, a buyer who wants 8% on the lower NOI would pay $450,700, not $499,000. The $500 a month is worth about $48,000 of price.
• Debt coverage falls from 1.32 to 1.13. Lenders that use this ratio set their own minimum, so ask yours what it is before you assume the loan still works.
• Cash-on-cash return falls from 8.9% to 3.6%, on the $114,770 of cash the purchase takes.

The building banks $5,422 a month instead of $5,922. A fourplex with one unit standing empty for nearly seven months of the year would bank the same amount. That is the whole point of the number: a full building can collect like a much emptier one.

Cash flow reaches zero at about $1,227 a month uncollected, which is 19.5% economic vacancy. That is the figure to hold the seller’s story up against.

How do you check a seller’s number?

Ask for collections, not the rent roll.

• Twelve months of actual deposits, set next to the scheduled rent for the same twelve months. The gap between them is the economic vacancy you are buying.
• The current delinquency report, so you can see who is behind and by how much.
• What concessions are running today, and on how many units.
• Every lease’s rent and end date, against today’s asking rent, which gives you the loss-to-lease line. How to read a rent roll covers what that document does and does not tell you.

A seller who can hand over a rent roll in a minute but needs a week to find twelve months of collections has told you something worth knowing.

How do you run it on your own building?

Enter the rent roll unit by unit in the multifamily calculator, then widen the Vacancy rate box from the weeks between tenants to every dollar you do not expect to collect. For 6% turnover plus $500 a month of concessions and late rent on $6,300 of scheduled rent, that box reads 13.9%, and the cash flow under it is the one to judge the asking price against. How to analyze a multifamily property walks the rest of the way from a rent roll to an offer.