Vacancy assumptions
Does vacancy affect DSCR?
Yes. Vacancy can reduce effective rental income, which lowers net operating income and DSCR. Even a small vacancy allowance can matter when a property is close to a lender's required coverage ratio.
How vacancy enters the calculation
Effective rent = Monthly rent x (1 - Vacancy rate)
A property with $3,000 monthly rent and a 5% vacancy allowance has $2,850 of effective rent before operating expenses. That lower income flows into NOI and then into DSCR.
When vacancy matters most
- The property is close to 1.00 DSCR.
- The rent estimate is aggressive for the market.
- The property has seasonal short-term rental income.
- There is lease rollover risk soon after closing.
Model more than one scenario
Run a base case and a conservative case. If 5% vacancy clears the target but 10% vacancy fails, the deal may need more rent, lower expenses, or less debt.
Change vacancy and watch DSCR move.
Run vacancy scenariosEducational information only. Lenders may use their own vacancy, rent, and expense assumptions.