Vacancy rate is the percentage of a unit’s or a portfolio’s rental capacity that goes uncollected because it’s empty. You can measure it by units (how many are vacant) or by dollars (rent lost to vacancy versus potential rent). Two months empty on a 12-month lease is roughly a 17% vacancy rate for that unit.
Vacancy is one of the largest hidden costs in rental investing, which is why a realistic vacancy allowance belongs in every NOI and cash-flow estimate. Underwriting a property at 0% vacancy is one of the most common ways to make a marginal deal look better than it really is.