Help with Vacancy cost for Deal Analysis

[Mike DeLeo]

Hi BP Community,

I am analyzing small MF units (2-4) and I am unsure how I should be estimating vacancy costs.

I will be living in 1 unit, and the remaining 1-3 units will be rented to produce income. So (correct me if I'm wrong on this), the vacancy cost only exists if the place is empty (which hopefully it won't be, but we are setting aside money just in case this does happen?). So I am estimating the amount of mortgage I will have to pay over the year if one or more units were empty?  Or is it the % of income lost due to vacant units?

I appreciate any insight on this concept. I am a newbie and in the process of researching for that first deal. Trying to get my ducks in a row.

Thanks BP!

Mike