Running Numbers: how do you take out your vacancy?

[Steven J.]

I'm curious as to some small details in running numbers some of you do.

I've been running numbers in the BP buy and hold calculator versus another speadsheet an investor gave me. They both are very helpful and give out almost the same information. One thing I do notice is where/when the vacancy is taken out.

Is it more wise to take a 10% vacancy off of total income (units + laundry + misc) or do you take 10% off of just the units? And is it preferred to not include vacancy in expenses but instead as part of your total income, or does it not matter? Is that just an aesthetic decision in your speadsheet as you're running numbers?

Reason I ask is its sending me slightly conflicting results. Its not a huge difference in smaller units with low turn over but as vacancy rate increases I think it really adds up.

[J Scott]

If reduced vacancy will impact gross income on non-rent items (like laundry), then I imagine you'd want to include the 10% loss across all income. On the other hand, if reduced vacancy won't impact income from those other sources (for example, storage that's only used by 5% of the tenants), you should probably not reduce income across the board.

Does that make sense?