Is there an optimum occupancy rate?

[Gregory Schwartz]

It's common sense that a property with a high vacancy is bad. Probably the worst.

And I'm told that if a property is 100% occupied you're not charging enough. 

Soooo I would assume that there is an occupancy rate that is optimal. Is 90% or 85% or maybe 95%, the magic number where you're maximizing rental rates and minimizing vacancy? Is this magical number true across all asset classes (SFR, duplexes, apartments)?

Math is fun! Let's use a 4plex as an example (vacancy rates over a multiple-year period)...

4-plex A: rents are at $750 per unit, $3000 per month, $36,000 per year.

       At 5% vacancy, the actual rents collected = $34,200

4-plex B: rents are at $650 per unit, $2600 per month, $31,200 per year.

       At 0% vacancy, the actual rents collected = $31,200

4-plex C: rents are at $900 per unit, $3600 per month, $43,200 per year.

       At 25% vacancy, the actual rents collected = $32,400

In this hypothetical example, we can increase rental rates and wait for a better high paying tenant and make more money than if we lowered the rates to minimize vacancy.  But at a certain point trying to drive rents to $900 results in an overall decrease in income due to the much higher vacancy rate. 

Keep in mind this doesn't take into account the quality of tenant, the frequency of "turns" or the longevity of say. 

So what do you think? What occupancy rate makes you feel like your maximizing your profit?