Physical vs. economic vacancy
Physical vacancy is time the unit sits empty. Economic vacancy is all income you expected but didn't collect: empty days, concessions, unpaid rent, and below-market renewals. Economic vacancy is usually larger.
What turnover really costs
- Lost rent between tenants
- Make-ready: paint, cleaning, repairs
- Leasing fees and marketing
- Utilities carried while vacant
- Your time or your manager's time
A single turnover can cost more than a month of rent once make-ready and leasing are included.
Vacancy sensitivity
| Vacancy | Effective income | NOI | Annual cash flow | DSCR |
|---|---|---|---|---|
| 0% | $28,800 | $14,616 | −$3,347 | 0.81 |
| 5% | $27,360 | $13,176 | −$4,787 | 0.73 |
| 8% | $26,496 | $12,312 | −$5,651 | 0.69 |
| 10% | $25,920 | $11,736 | −$6,227 | 0.65 |
Each percentage point of vacancy on $2,400 rent costs $288 a year — and in this example falls straight through to cash flow.
Choosing a vacancy assumption
There is no universally correct vacancy rate for Houston. Use evidence for the specific property type and area: days-on-market for comparable leases, the property's own history, and current rental-market reports from sources like the Houston Association of REALTORS — read with attention to geography, property type, and period.
Stress-Test a Deal
Raise vacancy in the Deal Generator's stress test and watch cash flow and DSCR respond.
Open the Deal GeneratorSources & Further Reading
- Houston Association of REALTORS — Market statistics and housing reports. www.har.com
- U.S. Census Bureau — American Community Survey data. data.census.gov
- Texas Legislature — Texas Property Code, Chapter 92 — Residential Tenancies. statutes.capitol.texas.gov/Docs/PR/htm/PR.92.htm
Sources accessed for review on October 5, 2026. Laws, rates, and programs change — confirm current details at the source.
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