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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 13Calculation 7: Vacancy and Credit Loss

What It Means

Vacancy and credit loss is the potential rental income that is lost due to space that lies unoccupied or due to nonpayment of rent by tenants.

You’ll use vacancy and credit loss to reduce the gross scheduled income (i.e., the property’s total potential income) to give you the gross operating income (GOI), which is the amount of revenue you actually expect to collect.

This term is also called vacancy and credit allowance, reflecting its use as an estimate of future losses that may occur due to turnover and uncollectible rent.

A number of real-world factors can impact vacancy and credit loss. If the rents that you charge are less than what tenants must pay for comparable properties, ...

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