rental property vacancy savings

[Monica Evans]

Hi Everyone,

I have a question about saving for vacancy on a rental property. My husband and I are analyzing numbers and are struggling with this concept. For this example, rent is $1400/month. If we are saving 5% per month for vacancy, that is $70/month. The mortgage payment will be $1000/month so if we were to have 2 months of vacancy, we would need to pay $2000. That is over 28 months worth of the vacancy savings in this case. 

Are we missing something? 

If any landlords out there can weigh in on this and point out anything we're missing or provide clarity, we'd greatly appreciate it!

Monica

[Kyle J.]

How long does it take to re-rent the property in your market? In mine, it never taken me longer than a couple weeks, but I always figure one month of vacancy to be safe. 

One month of vacancy is slightly over 8% annualized. It sounds like you’re concerned about being able to cover two months of vacancy but only saving 5%. If it really takes that long in your market, you might need to increase the amount of savings you’re setting aside.