Open almost any spreadsheet written to evaluate a Richmond rental and you will find a line that says Vacancy: 5%. Sometimes 7%. It is entered early, it is never revisited, and it is almost always wrong — not because the percentage is unreasonable, but because of what it silently claims to include.
That single line is doing a lot of work. It is standing in for lost rent, turnover labor, make-ready costs, marketing, utilities during the gap, and the timing risk of when the gap occurs. Most of those are not proportional to rent, and most of them do not scale the way a percentage implies.
Here is a more honest way to model it, and why getting it right changes decisions.
Quick Answer
A flat vacancy percentage only captures lost rent. The true cost of a turnover also includes make-ready work, leasing and marketing costs, utilities and lawn care during the gap, and the fact that a vacancy landing in December costs more than one landing in June. A better approach is to model vacancy as a per-turnover event cost multiplied by your expected turnover frequency, then convert that to an annual figure — rather than applying a percentage to gross rent and assuming it covers everything.
What the Percentage Actually Represents
A 5% vacancy assumption on a property renting at $2,000 per month reserves $1,200 a year. Framed differently, it assumes the unit sits empty about eighteen days per year.
If your tenants stay an average of two years, that means you are budgeting about thirty-six days of vacancy per turnover cycle — which, for lost rent alone, is often roughly right in a healthy Central Virginia market.
The problem is that lost rent is not the only thing that happens during those thirty-six days.
The Line Items the Percentage Hides
1. Make-ready costs
Between tenants, something always needs doing. At minimum: cleaning, touch-up paint, carpet cleaning, rekeying, and a punch list of small repairs that were tolerable while occupied. Periodically: full interior repaint, flooring replacement, an appliance.
These costs have almost no relationship to monthly rent. A make-ready on a modest Chesterfield ranch and one on a similar house in Henrico cost about the same regardless of the rent each commands.
2. Leasing and marketing
Photography, listing syndication, showings, application processing and lease preparation. If you use a manager, this often appears as a leasing fee. If you self-manage, it appears as your time, which is a real cost even when it does not appear on a bank statement.
3. Utilities and upkeep during the gap
An empty property still needs power and heat — you cannot let a vacant house in Richmond go unheated in January without risking frozen pipes. The lawn still needs mowing between April and October, and an unmowed lawn is both an HOA problem and a leasing problem. Water stays on for showings.
4. Carrying costs that do not pause
The mortgage, property taxes and insurance continue. So do HOA dues. Nothing about a vacancy reduces the fixed side of the ledger.
5. Timing risk
This is the one investors most consistently ignore. Vacancies are not evenly distributed across the calendar. Central Virginia leasing activity is meaningfully stronger in late spring and summer than in late fall and winter. A lease that expires in November, in a slower stretch of the year, tends to produce a longer vacancy and more pricing pressure than one expiring in June.
A pro forma with a flat percentage treats a December vacancy and a June vacancy as identical. They are not.
A Better Model: Cost Per Turnover
Rather than a percentage, build the cost of one turnover event, then divide by expected tenancy length.
Step 1 — Estimate days vacant per turnover. Be honest and season-aware. Include the time to make the property ready, not just the time to find a tenant. A property that takes two weeks of make-ready and three weeks to lease was vacant for five weeks, not three.
Step 2 — Add up the event costs.
- Lost rent (daily rent × days vacant)
- Make-ready: cleaning, paint, flooring, repairs, rekeying
- Leasing and marketing cost
- Utilities during the gap
- Lawn care during the gap
- Any turnover-specific items (carpet, appliance replacement) amortized across cycles
Step 3 — Divide by expected tenancy length in years to get an annual vacancy-and-turnover reserve.
Step 4 — Compare that to what your flat percentage was reserving. For most single-family rentals, the honest number is larger.
An illustrative example
The figures below are for demonstrating the method only — use your own property’s actual costs.
| Line item | Amount |
|---|---|
| Rent | $2,000/month ($66/day) |
| Days vacant (make-ready + leasing) | 35 |
| Lost rent | $2,310 |
| Make-ready (clean, paint touch-up, repairs, rekey) | $1,400 |
| Leasing / marketing | $1,000 |
| Utilities during gap | $180 |
| Lawn care during gap | $120 |
| Total per turnover | $5,010 |
| Expected tenancy | 2 years |
| Annualized | $2,505/year |
Against $24,000 of gross annual rent, that is roughly 10.4% — about double what the 5% line reserved. The property is not worse than it looked. The model was.
Why This Changes Decisions
Understating vacancy distorts three things.
Acquisition. A property that pencils at 5% vacancy and fails at 10% is a deal you should know about before closing, not after. On thinner deals, this single assumption can be the difference between positive and negative cash flow.
Renewal strategy. Once you know a turnover costs you several thousand dollars, the arithmetic of a renewal changes. Pushing rent by $75 a month gains $900 a year. If it raises the probability of a turnover meaningfully, it is a bad trade. This is the clearest practical payoff of modeling vacancy properly, and it is why experienced owners are often more conservative on renewal increases than new ones.
Reserves. An owner reserving 5% will be short when the turnover arrives, and shortfalls tend to produce rushed decisions — cheaper make-ready, faster tenant approval, looser screening. Those decisions cost more later.
Levers That Actually Reduce Vacancy Cost
- Manage lease expiration dates. Steer renewals toward spring and summer expirations using shorter or longer initial terms. A fifteen-month lease that moves an expiration from December to March is worth more than most rent increases.
- Start the turnover before the tenant leaves. Do the pre-move-out inspection early, line up vendors, and begin marketing during the notice period where the lease and tenant cooperation allow.
- Overlap make-ready with marketing. Showing a property that is being prepared, with a clear ready date, compresses the gap.
- Retain good tenants. The cheapest vacancy is the one that does not happen. Responsive maintenance and reasonable renewal offers are, in strict financial terms, vacancy-reduction spending.
- Price to the current week, not last year. Chasing a number the market has moved past is the most expensive form of optimism in this business.
- Keep the property genuinely ready to show. Deferred cosmetic work extends days on market far more than owners expect.
Vacancy Differs by Submarket and Property Type
One percentage across a portfolio is another simplification worth abandoning. Within the Richmond region:
- Urban apartments and condos — Shockoe, the Fan, Scott’s Addition — tend toward shorter tenancies and more frequent turnovers, but often lease quickly when priced correctly.
- Suburban single-family homes in Henrico, Chesterfield and Hanover typically hold tenants longer, but make-ready costs per event are higher because there is more square footage and a yard.
- Outer-county properties in Goochland, Powhatan and New Kent may take longer to lease simply because the pool of renters searching that specific geography is smaller.
Model each property against its own submarket rather than applying a portfolio average. Our free rental analysis is address-specific for exactly this reason, and the Learning Center covers related pricing and renewal topics.
A Note on Data Sources
Resist the temptation to import a national vacancy rate into a single-property model. National and metro-level figures, including those published by the U.S. Census Bureau’s Housing Vacancy Survey, describe aggregate housing stock across all types and tenures. They are useful context and a poor proxy for what a specific three-bedroom house in Mechanicsville will do. Your own turnover history, and a manager’s data on comparable properties, will tell you more.
Track Four Numbers, Not One
The reason most owners fall back on a generic percentage is that they have never measured their own. You only need four figures, and after two turnovers you will trust them more than any benchmark:
- Days vacant. Keys back to new lease start. This is the number that actually costs you money.
- Turn days. Keys back to rent-ready. Everything here is under your control — scheduling, vendor response, how fast you approve a scope.
- Days on market. Listed to signed application. This measures your pricing and your photos, nothing else.
- Renewal rate. The share of residents who sign again. It is the single biggest lever on how often you pay any of the above.
The gap between turn days and days on market is where the diagnosis lives. If a unit sat 40 days and 32 of them were waiting on flooring, you have a vendor problem, not a pricing problem — and dropping the rent would have fixed nothing. Owners who track only total days vacant tend to solve the wrong one.
Concession or Lower Rent? Price Both Against the Vacancy
When a listing is slow, you have three moves, and they are not equivalent. One week of vacancy costs roughly a quarter of a month’s rent, so the comparison is straightforward arithmetic once you frame it over the full lease term:
| Option | What it actually costs over a 12-month lease |
|---|---|
| Hold the rent, accept more market time | Weeks vacant multiplied by about a quarter of monthly rent, plus the carrying costs those weeks add |
| Drop the asking rent | The reduction times twelve — and it resets the base you renew from next year, and the year after |
| One-time concession | Paid once, with the headline rent and next year’s renewal base left intact |
That middle row is the one owners underestimate. A cut to asking rent is permanent in a way a concession is not, because every future increase compounds off the lower number. When the choice is close, the concession is usually the cheaper instrument.
Lost Rent Is Not a Deduction
A persistent misconception deserves a flag: rent you never collected because the unit sat empty is generally not deductible, since it was never reported as income in the first place. What you can typically deduct are the real expenses you incurred during the gap — utilities, insurance, advertising, repairs, management fees — under the ordinary rules for rental property. The practical consequence is that vacancy hits your return at full strength, without the softening that a deductible expense provides. See the IRS guidance on rental income and expenses, and confirm the specifics with your own CPA.
Frequently Asked Questions
What vacancy rate should I use for a Richmond rental?
Rather than picking a rate, build the cost of one turnover and divide by your expected tenancy length. For many single-family rentals the resulting figure lands well above the 5% that spreadsheets default to.
Does vacancy cost include make-ready?
It should. If your model reserves only lost rent, you are underfunding turnovers by a substantial margin.
How long does a Richmond rental typically sit empty?
It depends heavily on price, condition, property type, submarket and season. Rather than a rule of thumb, ask for current days-on-market data for comparable properties in the specific area.
Is it worth raising rent if it might cause a turnover?
Run the arithmetic. Compare the annual gain from the increase against your modeled turnover cost multiplied by the added probability of the tenant leaving. Modest increases on good tenants frequently fail that test.
Should I use different vacancy assumptions for different properties?
Yes. Property type, submarket and tenant profile all move the number meaningfully.
Does a property manager reduce vacancy cost?
A good one should reduce days on market through pricing and marketing, and reduce turnover frequency through retention. Whether that outweighs the management fee depends on the property — which is a calculation worth doing rather than assuming in either direction.
How many turnovers should I assume over a five-year hold?
Work backward from your renewal rate rather than guessing. If most residents renew once and move at the end of year two, a five-year hold implies two or three turnovers — so budget cost per turnover that many times, not a flat annual percentage. If you have no history yet, model a conservative case and a realistic one and see whether the deal still works in the conservative one.
Model It Against Your Actual Property
If you would like a view of realistic days on market, turnover costs and renewal expectations for a specific Richmond-area address, that is precisely what our analysis covers.
Request a free rental analysis, review our management pricing, or speak with a property manager at (804) 545-6651.
General information for rental property owners, not tax, legal or investment advice. Consult your own advisors regarding your specific circumstances.
