Your gross scheduled income calculation is only the start. Learn the 2026 formulas and average vacancy rates to calculate Effective Gross Income (EGI) and assess risk.
Table of Contents
Key Takeaways
Rental property finance keeps changing. You must account for vacancy risk. It makes your income projections accurate. You move from Gross Scheduled Income (GSI) to Effective Gross Income (EGI). Data from 2024-2025 shows U.S. rental vacancy rates were about 6.9-7.1%. For 2026, we expect a slow drop in high-end markets. But some areas will still feel pressure from too many new homes. Good plans include calculating vacancy losses well. You should also think about the economy, like people moving and rising prices. Keep your tenants happy to protect your income.
Navigating Uncertainty in Rental Markets
Imagine using your savings to buy a rental property. Then, you wait months for tenants. Empty units eat your profits. In 2026, the economy is getting better but still has unknowns. Vacancy risk is not a small problem. It can kill your profits.
But there is good news. You can learn to move from Gross Scheduled Income (GSI) to Effective Gross Income (EGI). This turns a possible problem into a safety net.
This guide will show you how to handle vacancy risk in 2026. It uses real data from 2024-2025. You will get useful calculations and plans. Whether you own many properties or are just starting, you will learn how to make your investments better. You can lose less money and be more stable for a long time. We will look at today’s market and what might happen next. You will be ready for anything.
Understanding GSI and EGI: Your Income Foundation
Rental property finance has two main ideas: what you could earn and what you really earn. Accounting for vacancy risk connects them. It makes your hopeful plans feel real.
What is Gross Scheduled Income (GSI)?
GSI is all the rent you could get. It assumes every unit is full and everyone pays on time. You start your income analysis here. Find it by multiplying units by monthly rent, then by 12 for the year.
Think about a 10-unit building. Each unit rents for $1,500 a month. Your GSI is 10 x $1,500 x 12. That equals $180,000 a year. This number assumes no empty units. But real life has tenant moves and bad economies.
GSI is your benchmark. It shows the most a property can make before costs. In 2024-2025, investors became more careful. They raised base rents by about 3.5% each year to fight inflation. This changes by location.
What is Effective Gross Income (EGI)?
EGI goes beyond GSI. It takes away losses from empty units and unpaid rent. It is the real income you can trust after vacancy risk.
The formula is simple: EGI = GSI + Other Income – Vacancy Losses – Credit Losses.
Other income could be laundry fees, parking, or late charges. Vacancy losses are a part of your GSI, based on the market average. For example, a GSI of $180,000 with a 7% vacancy rate means $12,600 in losses. Your EGI goes down by that amount.
In 2024, vacancy rates hit about 6.9%. This made EGI very important for correct cash flow plans.
Why Moving from GSI to EGI Matters
If you skip this step, you might borrow too much money. In 2025, more homes were built, but demand stayed the same. EGI protects you from being too hopeful. When you include vacancy risk early, your Net Operating Income (NOI) stays strong. This helps you get better loans and make smarter choices.
Why Vacancy Risk Matters in 2026
Vacancy risk is more than empty units. It affects your whole financial system. Unplanned vacancies can shrink your profits, raise costs per tenant, and hurt your returns.
Look at the big picture. In 2024-2025, many new apartments were built. This pushed vacancy rates up in some places. You need to be precise now. Investors who ignore vacancy risk often run out of cash. This is extra true when the economy changes.
Also, lenders look closely at your EGI for loans. If you show you plan for vacancies, they may give you a better deal. For 2026, markets should become steadier. Those who master this skill will do better. They can turn possible losses into wins.
Current Vacancy Trends: A Look at 2024-2025
To plan for 2026, let’s see what just happened. The U.S. rental market had both recovery and problems. Vacancy rates tell the story.
National Rental Vacancy Rates
In mid-2025, the national rental vacancy rate was 7.0%. This was a small rise from before. Why? More new homes were built, especially apartments in Sun Belt areas.
By late 2024, rates were already at 6.9%. This showed a trend of more empty units in a tough economy. Homeowner vacancies were much lower at 1.1%. Rental properties are riskier because leases are shorter and people move more often.
Trends in Different Segments
Fancy apartments (4- and 5-star) saw vacancies hit 11.8% by end of 2024. But they dropped a bit by 2025. This means high-end areas are bouncing back. People want nice features.
Business rentals also felt pressure. In some areas, new rentals were 50% below 2024 levels. Overall, apartment vacancies rose to 5.2% by end of 2024. This was due to people moving and job market shifts.
Differences by Region
Sunbelt cities like Austin and Phoenix had vacancy rates over 14%. They built too much. Northeast markets like New York stayed low at 4-5%. This shows you must know your local area to assess risk.
Past factors like pandemic moves and inflation still have effects. Rent growth settled at 3.5% per year. This is lower than before, but it helps balance some vacancy impacts.
What to Expect in 2026
Looking forward, 2026 should be a turning point. But you still must account for vacancy risk. We think overall rates will fall slowly. But some places with too many homes will still struggle.
National Forecasts
Rental vacancy rates should be about 7.1% in 2025. They might drop to 6.5-7.0% in 2026. This is because fewer new homes will be built. Demand for apartments should be higher than new supply by late 2025. This will make markets tighter in 2026.
Rent growth should speed up to 3-4% per year. A steadier economy will help. But some regions may still have over 14% vacancies, especially where building continues.
Forecasts by Sector
Apartments should see better occupancy. Rents will rise slowly. Business rentals will improve, but only a little. Their rent growth may be near 1.0%.
Fancy units could see vacancies fall from 11.8% to 9-10% by 2026. People are returning to cities. But cheaper housing might face more risk from policy changes and economic worries.
Big Factors That Could Change Things
Trade rules, taxes, and interest rates could affect these plans. If the economy grows fast, vacancy risk goes down. A recession would push it up. You should model your plans with a 5-10% vacancy buffer to be safe.
What Affects Vacancy Risk?
Vacancy risk comes from many connected things. Knowing what happened in 2024-2025 helps you plan ahead.
The Economy and Market Forces
Rising prices and interest rates matter a lot. In 2024, changing rates made people delay moves. This increased vacancies. Remote work changed demand too. Suburban rentals had lower risk than city ones.
Some areas had too few homes. Others had too many. Vacancies went up where new units outpaced new renters.
Things About Your Property
Rent price affects vacancy. High rents scare tenants away. Good prices fill units fast. Property condition and features matter too. A well-kept building with modern perks has fewer people moving out.
Happy tenants are key. In 2025, properties with great service and community saw 20-30% lower vacancy rates.
Outside Influences
People moving for jobs and cheaper living shifted vacancies by region. Housing rules added complexity. The end of eviction pauses was still felt in 2025.
New technology, like AI for property management, is starting to help by matching tenants better.
- High Loan Costs: Expensive borrowing hurts new builds. This changes supply and vacancy.
- Insurance and Maintenance Costs: Rising costs force rent up. This can increase vacancy if you’re not careful.
- Population Changes: Older people and millennials buying homes change rental demand.
Look at these factors to make your EGI calculations better.
How to Calculate Vacancy Loss: Simple Steps
Good calculation is the base of handling vacancy risk. Here is how to do it step by step.
Step 1: Find Your GSI
Start with full potential: Units × Rent × 12. Adjust for current market rates. In 2024-2025, average rents for two-bedroom homes rose slowly.
Pro Tip: Our Annual Gross Scheduled Income Calculator makes this first step easy and error-free.
Step 2: Guess Your Vacancy Rate
Use past data and future guesses. For 2026, use 6-8% for the country, or 10% in areas with too many homes.
Step 3: Find Vacancy Loss
Formula: Vacancy Loss = GSI × Vacancy Rate.
Add credit losses for unpaid rent (usually 1-2% of GSI).
Step 4: Calculate Your EGI
EGI = GSI + Other Income – Vacancy Loss – Credit Loss.
Real Example 1: A Small Apartment Building
A 5-unit property. Rent is $2,000 per unit each month.
GSI = 5 × $2,000 × 12 = $120,000.
With a 7% vacancy rate (2025 average): Loss = $120,000 × 0.07 = $8,400.
Other income: $5,000 from amenities. Credit loss: $1,200 (1%).
EGI = $120,000 + $5,000 – $8,400 – $1,200 = $115,400.
This is your real income after vacancy risk.
Example 2: A Large Apartment Complex
A 50-unit complex. Rent is $1,800 per unit.
GSI = 50 × $1,800 × 12 = $1,080,000.
With a 5.2% vacancy rate (2024 average): Loss = $1,080,000 × 0.052 = $56,160.
For 2026, maybe 4.5%: Loss = $1,080,000 × 0.045 = $48,600. Your EGI goes up. This shows why watching trends helps.
These steps make sure you measure risk instead of just guessing.
How to Reduce Vacancy Risk
Good plans can cut vacancy impacts a lot. This makes your EGI better.
Keep Your Tenants Happy
- Give incentives to renew, like small rent cuts or new appliances.
- Create a community with events. This cut turnover by 15-20% in 2025.
- Fix maintenance issues fast. This makes people happier.
Market Well and Price Right
- Use data to set rent. Follow market trends. Don’t charge too much when rents only rise 3.5%.
- Use online sites to rent faster.
- Check tenants carefully to avoid unpaid rent.
Mix It Up and Change
- Offer different unit types for different renters.
- Watch the economy so you can adjust early.
- Add popular features like smart home tech. This lowers vacancy in busy markets.
In 2024-2025, properties using these ideas saw vacancies drop 1-2%.
A Success Story
A Midwest investor had 9% vacancy in 2024 because people moved away. They recalculated EGI with a 7% plan and started a tenant program. They got real vacancy down to 5% by mid-2025. Their returns grew by 12%.
Your 2026 Success Plan
Handling vacancy risk in 2026 is a must. It is how you succeed in rental property finance. We moved from GSI’s dream to EGI’s reality. We used calculations, trends, and plans from 2024-2025 data.
Markets are changing. Rents should rise, and vacancies should stabilize. Use these tools. Make your models better. Lower your risks. See your investments grow. The secret to lasting success is to plan ahead, not react too late. Start using these ideas now for a safer future.
