Quick Answer
Vacancy sensitivity DSCR simulation models the impact of 5-25% vacancy rates on debt service coverage, helping you stress-test properties before acquisition. A property with 1.30 DSCR at 5% vacancy may drop to 1.10 DSCR at 15% vacancy—below most lender thresholds. Use vacancy simulation to ensure your properties maintain 1.15+ DSCR even at 10-15% vacancy rates.
Key Takeaways
- 5% vacancy assumption: Standard for stabilized properties, minimal DSCR impact
- 10% vacancy: Typical recession scenario, DSCR drops 0.10-0.15
- 15% vacancy: Severe downturn or property-specific issues, DSCR drops 0.20-0.30
- 25% vacancy: Worst-case scenario, tests DSCR resilience under extreme stress
- Target 1.15+ DSCR at 10% vacancy to ensure qualification through market cycles
FAQ
Q: What vacancy rate should I stress test? A: Long-term rentals: 5–10%. Short-term rentals: 15–30%. Always model scenarios higher than your market average.
Q: How does vacancy interact with rate increases? A: Combine vacancy stress with +1% and +2% rate scenarios. Your worst case should include both factors simultaneously.
Q: What DSCR should survive a vacancy spike? A: Target 1.15+ DSCR even at elevated vacancy. This protects against underwriting adjustments and market downturns.
Next Step
Use the DSCR Calculator to model multiple vacancy levels and find your downside guardrails before committing to the loan.