Vacancy & Collection Loss

Rental properties always have a "loss" or reduction in income from their potential gross income due to empty units (vacancy), from turnover and from the possible nonpayment of rent (or from rent that cannot be collected).  Even in high-demand markets when rentals are difficult to find there will be some vacancy and collection losses.  Thus, appraisers include an allowance in their income and expense estimates for income loss or for a vacancy and collection loss.  

Appraisers reference broker reports on vacancy rates by property type within sub-market areas.  They also survey local market areas to verify vacancy rates.  

The vacancy and collection loss used in the income approach to value section of an appraisal report attempts to reflect investor expectations over a typical holding period, thus they may not always match the current market vacancy rate.  A property could have an actual 0% vacancy and a strong lease, and many appraisers will still indicate a vacancy and collection loss since investors anticipate that losses in this area will occur. 

Contact us with your questions or concerns regarding vacancy and collection loss or regarding your specific appraisal assignment in Nevada at 1-702-568-6699.  We can also be e-mailed at grigdon@cox.net.  

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.