How Vacancy Assumptions Affect a Buyer's Offer
- Ed Lane
- May 19
- 5 min read
Updated: May 20
A common surprise for sellers of small multifamily property: even with a 100%-leased rent roll on the day of sale, a serious buyer's offer is based on something less than 100% of the leased rents. The reason is the vacancy assumption — and it's not lowballing. It's standard underwriting.
This piece walks through what the vacancy assumption is, what realistic numbers look like for York County 2-4 unit rentals in 2026, and how the assumption flows through to the buyer's offer.
Why buyers don't underwrite at 100% occupancy
Three reasons even a fully-leased property gets discounted to less-than-100% in underwriting:
1. Tenants turn over. No tenant stays forever. Even an excellent property with 4-year average tenure on a 2-4 unit will see roughly one turnover per year across the building. Each turnover creates 2-6 weeks of vacancy while the unit is made-ready and re-leased. Across 12 months, that's 8-24% vacancy spread across the whole building — the average is ~5%.
2. Tenants stop paying. Even tenants who don't formally turn over sometimes fall behind on rent. A tenant 60 days behind for a month is functionally vacant for that month, even though they're physically there. Credit losses on small multifamily run roughly 1-3% of gross rent in a stable property.
3. Re-leasing isn't instant. When a tenant leaves, the unit doesn't auto-fill. There's marketing time, application time, screening time, lease signing time, move-in scheduling. Even a desirable unit usually has a 2-4 week gap between tenants in normal market conditions.
The combined effect is that physical occupancy (units leased / total units) is rarely 100% over a 12-month period — and even when it is, economic occupancy (collected rent / potential rent) is rarely 100% due to turnover gaps and credit losses.
What's realistic for York County 2-4 unit rentals in 2026
For a typical York County 2-4 unit:
Excellent — recent updates, strong tenants, good location
Vacancy + credit loss: 4-6%
Notes: Quick re-leases, low credit loss
Average — older property, mid-tenure tenants, normal location
Vacancy + credit loss: 5-8%
Notes: Typical baseline
Below-average — deferred maintenance, tenant pool gaps
Vacancy + credit loss: 8-12%
Notes: Longer make-readies, more credit loss
Hanover/York City urban core (denser tenant pool, faster re-lease)
Vacancy + credit loss: 4-7%
Notes: Faster lease-up offsets some turnover loss
Rural townships (smaller tenant pool, longer marketing time)
Vacancy + credit loss: 7-10%
Notes: Slower lease-up extends vacancy gaps
Most York County 2-4 unit underwriting uses 5-7% as the default vacancy assumption. Specific properties get adjusted based on their actual trailing 24 months and the buyer's read on the local market.
How the vacancy assumption affects the offer
For a 4-unit property with $40,000 of gross rent:
At 100% occupancy: Gross income = $40,000
At 5% vacancy: Effective gross income = $38,000 (a $2,000 reduction)
At 10% vacancy: Effective gross income = $36,000 (a $4,000 reduction)
That income reduction flows directly through to NOI. At a 7.5% cap rate, the $2,000 NOI difference between 5% and 10% vacancy assumption equates to ~$27,000 of property value. The buyer's offer at 10% vacancy is $27,000 lower than at 5% — same building, different read on its operating risk.
Why some sellers' rent rolls signal higher vacancy assumptions
Three signals in a rent roll push a buyer's vacancy assumption up:
1. Tenant tenure history. If the rent roll shows three units that have all turned over within the last 18 months, the buyer assumes future turnover at the same elevated rate. The vacancy assumption goes from 5% to 8-10%.
2. Trailing 12 months of rent receipts vs. potential rent. If the bank statements show $36,000 collected on a property with $40,000 of leased rents — that's 10% economic occupancy gap, and the buyer underwrites future operations at 90% rather than 95% or higher.
3. Current vacant units. A property with one of four units currently vacant on the day of sale shows 25% physical vacancy in the snapshot. Even if the rest of the property is stable, the buyer underwrites that vacant unit's re-lease with vacancy reserves and discounts the offer accordingly.
Three habits that lower the buyer's vacancy assumption
Sellers who want their property to underwrite at the low end of the vacancy band (5-6% rather than 8-10%) tend to share three operating habits:
1. Long-tenure tenants where possible. Tenants who've been in place 3+ years signal stability. The buyer assumes the same retention pattern continues. The reverse — recent turnover — signals either a property issue or a screening issue and pushes the vacancy assumption up.
2. Documented re-leasing speed. Records of recent tenant transitions that show 2-3 week make-and-re-lease gaps (rather than 6-8 week gaps) demonstrate operational competency. The buyer assumes future turnovers will be similarly fast.
3. Clean rent collection records. 24 months of bank statements showing on-time rent deposits without big gaps reduces the credit-loss assumption. A buyer pricing in 1% credit loss on a stable rent collection history offers more than a buyer pricing in 3% on a spotty one.
What sellers can do before listing
Three pre-list moves reduce the vacancy assumption a buyer will apply:
1. Don't list with units vacant if avoidable. A vacant unit on the day of sale is the single biggest vacancy signal. If a unit just turned over, completing the make-ready and re-lease before listing usually nets more than the lost weeks of operations.
2. Renew leases coming due. Month-to-month tenants signal "could leave any month" and push the vacancy assumption up. Tenants on signed 12-month renewals signal stability. Renew the leases that are renewable before going to market.
3. Document the trailing 24 months of operations. Bank statements + lease history + re-leasing log. Sellers who can show clean, verifiable 24-month operations get the benefit of the lower vacancy assumption. Sellers who can't show the history get the higher assumption applied by default.
A direct option in York County
I'm Ed Lane, a local buyer in York County actively buying 2-4 unit rental properties directly from owners. Vacancy underwriting is part of the standard offer math — usually a 5-7% assumption for typical York County 2-4 unit properties, adjusted up or down based on the trailing operations history. Sellers with documented stable history get the favorable end of the band; sellers with shorter records get the typical-or-higher end.
For a plain-language framework on what a direct-to-buyer sale on a 2-4 unit actually looks like, visit yellowhousebuyers.com/free-guide.
If you'd like to talk through your specific situation, reach me through the site or call 717-347-6770.
This piece is general information about vacancy underwriting on York County small multifamily, not investment, legal, or appraisal advice. For specific questions about your property's vacancy profile, talk to an appraiser familiar with the York County market.
Related Reading
Want to talk about your specific situation?
I'm Ed Lane at Yellow House Buyers, LLC. I'm actively looking to buy 2-4 unit rental properties in York County directly from owners. I buy to hold long-term — not to flip, not to wholesale. If you want a no-pressure conversation about your property, here's how to reach me.
Or download the free 2026 York County Landlord's Strategy Guide — it walks all six selling scenarios with the actual math.
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