multifamily p&l & Proforma vacancy

There are a few ways to model Vacancy Loss but here we’ll focus on one that consists of Absorption & Turnover Vacancy and General Vacancy.

(1) With Potential Rental Income as your starting point, you subtract Absorption & Turnover Vacancy which is comprised of the actual in-place vacancy effected by the contractual leases. In addition to Absorption & Turnover Vacancy, you subtract out things like Concessions, Non Revenue Units and Credit Loss which gets you to Net Rental Income, and after Net Rental Income you add things like Parking and Other Property Income to get to Total Income.

(2) To calculate General Vacancy, you add back Absorption & Turnover Vacancy Loss to Total Income and then multiply this amount by your General Vacancy Loss %.

*If General Vacancy minus Absorption & Turnover Vacancy Loss is less than 0, then the “additional” General Vacancy Deduction is 0.

*If General Vacancy minus Absorption & Turnover Vacancy Loss is greater than 0, then the General Vacancy Deduction is equal to this amount (the result after you subtract Absorption & Turnover Vacancy).

We true up the income before applying the General Vacancy to avoid double counting and therefore deducting more vacancy than the “minimum” amount, and the virtue of modeling vacancy this way is to make sure we account for the minimum level of vacancy consistent with what you assume to be market.