Vacancy Rates, Washington investors and Seattle area in particular

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Vacancy Rates, Washington investors and Seattle area in particular

Alex Chin
Seattle, WA · Member since 2015 · 500 posts · 243 votes

Hello BP!

I am just getting started in my REI career and am interested in how experienced landlords estimate vacancy rates when looking at a potential investment.

Is there a website/trade journal you subscribe to?

Is this something that can only really be figured out with experience?

I understand that vacancy rates often depend heavily on the property itself, so do you just use a general rule of thumb when running the numbers on a property?

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
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    @Alex Chin

     - I ise neighborhodscout.com and they publish the local vacancy rate by neighborhood

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  • Mike R.
    Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
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    i use either 3% or 5% in my cash flow/cap rate calcs...any prop with consistently higher than 5% vacancy rate is not something i am interested in.... 

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  • Alex Chin
    OP
    Seattle, WA · Member since 2015 · 500 posts · 243 votes
    11y

    @Brie Schmidt - thank you for the tip! That is a great resource and way to fact-check against my gut when driving through a neighborhood.

    @Mike R. - but how do you back that assumption up when looking at a new investment opportunity? You can't just assume you will have a <5% vacancy rate when looking at an opportunity.

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  • Mike R.
    Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
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    i use either 3% or 5% in my cash flow/cap rate calcs...any prop with consistently higher than 5% vac is not something i am interested in.... 

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  • Mike R.
    Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
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    i asked for the rent roll (usually not available for less than 6 units) and copies of current leases.  i then look at how many of those leases are new.  additionally, you can ask to see how many tenants have lived there longer than 12 months.  Finally, during the initial walk through, i take my time and talk to any tenant that is on sight.  amazing what they will tell you about the current landloard other tenants.  

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  • Michele FischerPro Member
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
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    Low income properties and properties that are not well run or well maintained typically have higher vacancy rates and turnover costs.  We have very little lost rent costs since our low end clientele can move in mid month, but we average 7% on turnover costs, getting the trashed/filthy units back to rent ready.  You can influence how the property is run and maintained, but not the neighborhood.

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  • Alex Chin
    OP
    Seattle, WA · Member since 2015 · 500 posts · 243 votes
    11y

    @Mike R. -That's a good tip and I'll try to keep that in mind as I move forwards. I don't think I'll be making any 5+ unit buys any time soon, I want to cut my teeth on SFR or maybe a duplex to get my initial learning in.

    @Michele Fischer  - Thanks for the advice and notes on running a multi. I expect to take my lumps as I learn this business, but hoping to avoid some of the unnecessary ones thanks to BP contributors.

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