Vacancy rates factored into monthly expenses?
I was reading a BiggerPockets book and Mr. Turner said when estimating expenses, you take the vacancy rate and apply it to the rent price and include that as part of your monthly expenses. So if rent is $1000 and VR is 5%, you would factor in $50 as an expense each month. Is this just to prepare in case the property is vacant? Do you just put the estimated VR cost into an emergency fund for the time being? Should one increase rent to include this $50 (make rent $1050?) Or are you just “estimating” what vacancy would be but as long as the property is occupied there is no literal monetary value placed on a presupposed vacancy rate? I am very confused by this.