Small Multifamily Vacancy Rates and What They Actually Mean for a Value-Add Exit: Real Ranges, Not Projections
Last updated: August 24, 2026
Published August 24, 2026 · Updated August 24, 2026
What are realistic vacancy rates for small multifamily value-add exit math? In most stabilized underwriting today, the honest range runs 5% to 10% physical vacancy, not the flat 3% a lot of broker pro formas still assume. If you have ever pulled a T-12 on an eight-unit building and seen a 2% vacancy line, you already know that number was picked to make the deal look good, not to describe what a new owner will actually experience.
This is for the buyer underwriting a 6 to 40 unit value-add deal who has a spreadsheet full of optimistic assumptions and needs to know which vacancy number survives contact with reality. It is not for someone buying a single-tenant net lease asset, where vacancy math works completely differently.
The Big Stat
Where These Numbers Come From
The Findings
What Surprised Us
What This Means for You
FAQ
The Big Stat
Typical stabilized physical vacancy range for small rental buildings, based on the Census Bureau’s Housing Vacancy Survey and multifamily research published by Freddie Mac and Fannie Mae
Most brokers underwrite to the bottom of that range and most first-time buyers underwrite to a number below it entirely. Neither one is doing anything malicious. It is just how a rent roll gets dressed up for a marketing package.
Where These Realistic Vacancy Rate Numbers Come From
The vacancy ranges in this article come from three places, and I want to name them plainly instead of pretending there is some proprietary dataset behind it. First, the Census Bureau’s Housing Vacancy Survey, which tracks rental vacancy nationally on a quarterly basis and is the most cited public benchmark in the industry. Second, the multifamily research groups at Freddie Mac and Fannie Mae, which publish market commentary and vacancy trend data for the properties their agency debt actually finances, most of it in the 5 to 50 unit range that small multifamily buyers compete for. Third, the operating norms that show up across manufacturer specs and lender underwriting guides when they talk about “vacancy and credit loss” line items on an operating statement.
I did not run a survey of 300 buildings and I am not going to pretend I did. What I can tell you honestly is the pattern that shows up again and again when you compare a seller’s trailing pro forma against what a lender’s underwriter actually plugs into their own model for the same building. The lender number is almost always higher, and it is almost always closer to the Census and agency ranges than to the seller’s number.
The Findings
Vacancy is not one number, it is at least four different numbers depending on what stage of the value-add cycle a building is in. The table below breaks out the typical ranges we look at when we build or review an underwriting model for a small multifamily deal, from acquisition through stabilized exit.
| Deal Stage | Typical Vacancy Range | Why It Sits There |
|---|---|---|
| Seller’s marketing pro forma | 2%-4% | Optimistic assumption built to support a higher asking price |
| Stabilized physical vacancy (market norm) | 5%-8% | Census Bureau rental vacancy tracking and agency lender underwriting norms |
| Stabilized economic vacancy (vacancy plus bad debt plus concessions) | 7%-12% | Adds collection loss and turnover concessions on top of physical vacancy |
| Active renovation, units being turned | 20%-35% on affected units | Units offline for interior scope, not leasable during the turn window |
| Underwritten exit vacancy for a refinance or sale | 5%-7% | Appraisers and lenders normalize to a defensible market number, not the seller’s rosy number |
A seller’s 2%-4% vacancy line is a marketing number. A lender or appraiser underwriting the same building for a refinance will almost always land closer to 5%-8% physical vacancy, and the true economic vacancy after concessions and bad debt often runs 7%-12%. During active renovation, the units under scope can sit at 20%-35% vacancy simply because they are unrentable while the crew is inside.
What Surprised Us
Honestly, the thing that surprised me most when I started comparing broker pro formas against lender underwriting sheets side by side was not that the numbers were different. It was how consistently different they were. It was not random noise, it was a pattern, almost every time in the same direction.
The second surprise is that concessions get left out of vacancy math more often than actual vacancy does. A property manager juggling three buildings and a leasing quota will offer a half month free to fill a unit fast, and that discount never shows up as “vacancy” on the T-12, it gets buried inside collected rent. Economic vacancy catches it. Physical vacancy does not. If your exit model only tracks physical vacancy, you are underwriting a cleaner number than the building will actually produce.
The third pattern we notice repeatedly involves the renovation window itself. Buyers plan a 60-day turn schedule per unit on paper. Then a supply delay on cabinets or countertops pushes it to 90 days, and that extra month is pure vacancy loss that rarely makes it into the original pro forma. It worked in the spreadsheet. Then it didn’t, once the actual contractor schedule hit.
“The vacancy assumption is the one line in a pro forma where I want to see the underwriter’s math, not just the number. If someone hands me a 3% stabilized vacancy on a 12-unit building with no explanation, that tells me more about how the deal is being sold than about the building.” – David Stern Team
What This Means for You
If you are underwriting a small multifamily value-add exit right now, run the deal twice. Once at the seller’s vacancy assumption, and once at a realistic 6% to 9% physical vacancy with an additional 2% to 3% built in for concessions and bad debt. If the deal still works at the second number, you have a real margin of safety. If it only works at the first number, you are not underwriting a deal, you are underwriting a hope.
This matters more at exit than at acquisition, because your exit vacancy assumption drives your exit cap rate math and your exit NOI, which drives the sale price you are projecting. A half point of extra vacancy baked into your exit year model can move projected NOI enough to change your entire return story. That is worth sitting with for a minute before you build the rest of the model on top of it.
Pull the T-12, not the pro forma
The trailing twelve months of actual collections tells you far more than a broker’s projected year, since it reflects real turnover and real concessions.
Separate physical vacancy from economic vacancy
Build both lines into your model. An 8% physical vacancy with 3% in concessions and bad debt is closer to 11% economic vacancy, and your exit NOI should reflect that.
Add turnover buffer time to your renovation schedule
Whatever your general contractor quotes per unit, add real weeks for material delays before you convert that timeline into a vacancy loss figure.
If you want a second set of eyes on how a vacancy assumption is flowing through the rest of an exit model, our team walks through underwriting fundamentals on the value-add underwriting page, and we also break down how renovation timelines interact with carrying costs on the multifamily deal analysis resources. For buyers running numbers themselves before talking to anyone, some of the underwriting checks we reference get automated through tools like 8ight, which is worth knowing about even if you build your own spreadsheet by hand.
None of this changes on a Friday afternoon for us. Closings and diligence calls get scheduled around Shabbat, not the other way around, and that has never once cost a deal that was worth doing in the first place.
Frequently Asked Questions
How is stabilized vacancy typically measured on a small multifamily property?
Stabilized vacancy is typically measured as physical vacancy, the percentage of units sitting empty at any given point, which the Census Bureau’s Housing Vacancy Survey tracks nationally and reports quarterly. Most lenders underwriting agency debt through Freddie Mac or Fannie Mae expect a 5% to 8% physical vacancy factor on a stabilized 6 to 40 unit building, even when the seller’s trailing statement shows less.
What is the difference between physical vacancy and economic vacancy in value-add exit math?
Physical vacancy counts empty units, while economic vacancy adds in lost income from concessions, bad debt, and non-paying occupants, typically pushing the number 2 to 4 percentage points higher. On a stabilized small multifamily building, economic vacancy commonly lands in the 7% to 12% range even when physical vacancy alone looks closer to 5% to 8%.
Why do broker pro formas usually show lower vacancy than lender underwriting?
Broker pro formas are marketing documents built to support an asking price, so they often assume 2% to 4% vacancy regardless of what a Census-level market benchmark suggests. Lenders and appraisers underwriting the same building for a refinance or purchase typically normalize that number to 5% to 8%, matching the ranges published in Freddie Mac and Fannie Mae multifamily market commentary.
How much vacancy should I assume during an active unit renovation?
Units actively under interior renovation are typically offline the entire scope period, and across a rolling turnover schedule that can push affected-unit vacancy to a typical 20% to 35% range during the active construction phase. This is separate from stabilized vacancy and should be modeled as its own line item tied to your contractor’s realistic schedule, not the optimistic one.
Sources
- National rental vacancy rate benchmarks – U.S. Census Bureau, Housing Vacancy Survey
- Multifamily vacancy and market trend data – Freddie Mac Multifamily Research
- Multifamily market commentary and vacancy outlook – Fannie Mae Multifamily Market Commentary
- Industry vacancy and rent growth benchmarking – National Multifamily Housing Council Research
David Stern
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