Real Vacancy Factor
After owning a bunch of rental properties, I realized that for Single Family Homes, your real vacancy factor is not necessarily 10%. Why? If you have a mortgage on the house, logically then, if it becomes vacant, you will pay MORE vs. if the house is free and clear. Based on a spreadsheet I created, a $150K property with a $120K mortgage will have 17.62% vacancy factor (assuming it's vacant 2 months in 1 year) whereas if it does not have any mortgage, the real vacancy factor drops to 10.46% (of course the actual numbers will depend on the real estate taxes and other costs but apples-to-apples comparison makes me question the basis of the 10% vacancy factor). I uploaded the spreadsheet in the Fileplace.
The screen shot of the spreadsheet becomes too small if I include the whole thing so I am breaking the spreadsheet into 2 parts: cost of vacancy and the resulting vacancy factor. My question is: how do you really calculate the vacancy factor? I know the basis of the 10% is probably long term average but then again, it does not factor the real cost of a vacancy when you have a mortgage on the property. What am I missing? Does my analysis make sense?
Cost of vacancy (with mortgage)
Vacancy factor (with mortgage)
Cost of vacancy (with NO mortgage)
