Cash Flow Analysis Vacancy Percentage for SFR?

Question

I am wondering what is a good vacancy percentage to use in my cash flow analysis? Recommended values range from 5% - 40%.

I want to be realistic, but I don't want too miss out on a solid performer because I was too conservative in my analysis.

I currently have a SFR from an inheritance {my wife's childhood home) and while the CF is positive even with 40% vacancy in a practice analysis, it got me thinking to ask "What is a practical number to use?".

Clint Galliano · Answer

@Brent Coombs That makes sense. It goes to knowing your area & demo numbers.

Thanks!

Chris Soignier, I am practicing cash flow analysis on a property I already have. I was curious as to why there were different values used or recommended for the vacancy percentage when conducting an analysis on prospective property...

40% was the actual vacancy last year for my one property, so I guess I did OK to still have positive cash flow on it, even with that number.

Chris Soignier · Answer

It sounds like he may be analyzing a prospective acquisition, and all you can do is use pro forma estimates to evaluate whether such an acquisition makes sense.

Brent Coombs · Answer

@Clint Galliano, the reason that number varies (and most other number too - maintenance; capital expenditure; tax; utilities; insurance; property management...) is because every County has different demographics, which can highly affect the correct analysis between different properties.

Sorry about the non-specific answer. How about, just use the ACTUAL figures once it's up and running? Then you can tell us the answer. All the best...