Memphis Vacancy Rate

[Alexander Price]

I have seen a few posts recently and researched some data about the vacancy rate. It seems 2014 was about 10.65%. I am trying to acquire my second property in Memphis and want to make sure I use the correct vacancy rate for the area. When analyzing my first deal I used 8%. At the time it seemed reasonable based on what a few turnkey companies and PMs were advertising. Also I was under the impression that there was a significant demand on the rental market at the moment. I am not worried as I have margin in the cash flow for the first property. 

Did I misjudge? For my next property should I use a more conservative 10% vacancy rate? Obviously being more conservative and performing better is just fine, but I do not want to pass up perfectly good properties because they are borderline to my to my target COC.

[Alex Craig]

Most people use 8 to 10%.  I think it is hard to look across a entire market and put a vacancy rate on it. If Memphis is 10%, would that mean property managers should be at 10%? We are typically around 3%.  I think we are below that now.  Maybe ours is low because we start marketing and showing the house as soon as the tenant gives us a 30 day notice, thus giving us a head start on getting the property visible.  BTW, that is not easy to do (showing houses with tenants still in them). I think so many factors come into play here.  I have a triplex near the U of M has never had more then a 10 day vacancy.  My midtown stuff usually gets rented out in 7 days.  My Bartlett stuff takes a little longer to rent out in the off season, but the tenant lengthy of occupancy is longer.  Property condition comes into play which is correlated to the asking rent. If you are at $950 and everyone else is at $950, the home would need to look better then the rest of the comparable homes, if not, then your $950 home is an $850 home.

If you put down 10%, then you will be fine and likely exceed your expectations.