Rental rates are on the rise nationwide. Indicating strongly that rental properties is an increasingly wise investment.
When your looking for a house or apartment to rent, no vacancy is no quinoa. However, when you're in rental property management, the more time a property remains vacated the less rental income you rake in.
Calculating vacancy rate is an important part of determining risk when investing in a rental property. In order to maximize your return on investment (ROI), there are several factors to consider.
In today's post we take a long look at the long term and how calculating vacancy rate plays a big part in real estate investing success. Follow along as we lay out what you need to know.
How to Calculate Vacancy Rate
There are several ways to calculate a rental vacancy rate. Each type provides investors with current and future insight into the profitability of their investment. It is highly recommended that investors use this information to help make buying and managing property decisions.
Market Average
What type of rental property do you have? It is important to realize that the vacancy rate for different types of properties may be considerably different. For example, the residential sector may experience lower vacancy rates even as commercial space is in high demand.
Looking into the vacancy rate by asset class is therefore essential in determining if the property in question is performing at, below, or above market expectations.
Economic vacancy Rate
As the name elude, the economic vacancy rate is about the investors actual bottom line compared to maximum potential profits of the property. Here is where a property's investment potential meets the real world actual earnings of the investment.
Physical Vacancy Rate
Physical vacancy and economic vacancy are often referred to interchangeably and very well my have the same values. However, they may vary depending on the number of units and the rental values of each unit. Because of this many investors insist on separate analysis of average vacancy rate of each unit and not by the property as a whole.
Washington DC Vacancy Rate
In 2019 the Washington DC's house vacancy rate was 5.01% on par with the national average of 5.97%. Despite a considerably high average rental rate, Washington DC still boosts a better than nation average for fraction of median income spent on rent (19.4%).
These numbers translate to a strong balanced housing market. Most investors would agree that investing in real estate in Washington DC's current market has a strong chance of success. However, investors should be weary that not all properties make for smart investments.
A Numbers Game
When considering investments in real estate, calculating vacancy rate is crucial to determining risk. Take the time to consider and compare vacancy rates of all three kinds before making a decision to invest.
You don't have to go through these buying decisions alone. Home River Group™ takes your success in real estate investing as a matter of personal responsibility. If you are a serious investor looking for a partner you can trust, contact us today for a free instant rental analysis on your current or prospective investment property.
