Property Management
What is 'vacancy rate' and how does it impact a Delaware investment property's financial performance?
AThe percentage of the property's square footage that needs renovation
BThe percentage of rentable units or space that is unoccupied and not generating income — a high vacancy rate reduces effective gross income and NOI, reducing the property's value✓ Correct
CThe rate at which tenants vacate following rent increases
DThe percentage of tenants who are delinquent in rent payments
Explanation
Vacancy rate is the percentage of units or space that is unoccupied. Formula: Vacancy Rate = Vacant Units ÷ Total Units. A high vacancy rate reduces effective gross income (Potential Gross Income × (1 − Vacancy Rate)) and NOI. Market vacancy rates are used in appraisals; lower than market vacancy may indicate below-market rents.
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