Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Occupancy Rate

What it is:

Occupancy rate is the ratio of rental units rented versus the total number in the building, city, state, etc.

How it works (Example):

The formula for occupancy rate is:

Occupancy Rate = Units Rented Out / Total Units

For example, let's assume that Company XYZ owns an apartment building that has 300 units. Of those units, 275 are rented out. Using this information and the formula above, we can calculate that Company XYZ's occupancy rate is:

Occupancy Rate = 275/300 = 91.67%

Though our example uses units as the basis for calculating occupancy rate, it is also possible to use square feet or rent dollars instead.

The vacancy rate is equal to 1 - Occupancy Rate. In our example, the vacancy rate would equal 1 - 0.9167 = 8.3%

Why it Matters:

From a real estate investor's standpoint, occupancy rates are predictors of cash flow, and they provide a method by which the financial attractiveness and performance of various parcels of real estate can be compared. Clearly, investors like to see high occupancy rates. Low occupancy rates can indicate that a piece of real estate has a problem.

Related Terms View All
  • Baby Bills
    With its Windows and Office products, Microsoft has dominated the market for computer...
  • Leadership Grid
    Leadership behavior, as it relates to the leadership grid, has two types: task...
  • Numismatics
    Sometimes called "the hobby of kings," numismatics is not the act of hoarding cash. It is...
  • Record Low
    For example, let's look at this random chart for Cicso Systems (CSCO). Note the jagged...
  • Qualification Ratio
    For example, let's assume that Borrower X has $4,000 of monthly income and $30,000 of...