How this instrument works
A property's occupancy rate is the share of its units that are currently leased, stated as a simple percentage: occupied units divided by total units, times 100. Property managers watch it as a leading operations number — it moves week to week as leases turn over, well before slower figures like net operating income catch up to reflect the change.
The count is physical occupancy — it only asks whether a unit has a signed, current tenant in it, not whether that tenant is paying full market rent or paying at all. A building can show 100% physical occupancy while still underperforming, if several leases were signed below market to fill space quickly or a tenant is behind on rent; economic occupancy, which weights each unit by rent actually collected, is the stricter figure lenders and appraisers reach for once the physical count looks suspiciously perfect.
The formula also treats every unit as equal regardless of size or rent level, so a 40-unit building that is 90% occupied by studios is not directly comparable to one that is 90% occupied by three-bedroom units generating far more revenue. Units offline for renovation are a judgment call too — leaving them in the total understates the rate for units actually available to rent, while dropping them from the total inflates it, and the two choices are not interchangeable when a loan covenant sets a minimum occupancy threshold.
- Enter Occupied units — the count of units with a signed, current tenant in possession on the day you're measuring.
- Enter Total units — every unit in the building or portfolio, including any vacant, mid-turnover, or under renovation.
- Read Occupancy rate, % — occupied units divided by total units, multiplied by 100, updates the moment you change either figure.
- Recompute after each lease signs or ends so the rate tracks as a trend across the month, not a single snapshot.
- Compare the result against any breakeven occupancy figure written into a loan covenant or budget to see how much vacancy buffer remains.
Worked example — a 100-unit apartment building
Take a 100-unit apartment building where 95 units currently have a signed, paying tenant and 5 sit vacant between leases. Occupied units divided by total units gives 95 ⁄ 100, and multiplying by 100 returns an occupancy rate of 95.0% — a figure most property managers in a normal rental market would read as effectively full, since a handful of units turning over at any moment is routine rather than a warning sign.
That 95% reading matters most in what it implies for cash flow: if average rent across the building runs $1,400 a month, the 5 vacant units represent roughly $7,000 in monthly rent not yet being collected, money the operator can chase through faster turnover rather than a structural problem with the property. Set the same building at 70 occupied units instead and the rate drops to 70% — a level most lenders and owners would treat as a leasing or pricing problem worth investigating right away.
Questions
What counts as an occupied unit?
A unit counts as occupied if a tenant currently holds a signed lease and possession of the space, whether or not this month's rent has actually been paid in full. A model suite kept off the market, a unit mid-turnover with no tenant yet, and a unit closed for renovation are all conventionally treated as vacant, not occupied, even though none of them are available for a new tenant to move into today.
How is occupancy rate different from vacancy rate?
They are complements of the same count: vacancy rate is simply 100 minus occupancy rate, so a building at 95% occupancy sits at 5% vacancy by definition. Operators quote whichever framing suits the conversation — occupancy rate reads as a performance figure to report proudly, vacancy rate reads as a problem to solve — but both describe the identical mix of leased and empty units.
Is 95% occupancy a good number?
In most stabilized U.S. rental markets, 90-95% is treated as effectively full, since some vacancy is structural — units sit empty briefly between move-out and move-in even in strong demand. A rate above roughly 97% held for months can actually signal rents are priced below what the market would bear; well under 90% for a sustained stretch usually points to a pricing, condition, or marketing problem specific to that property.
Does occupancy rate include units under renovation?
Only if you choose to count them that way, and the choice changes the answer. Leaving an offline unit inside total units while it earns no rent lowers the reported rate; removing it from the total instead reports occupancy for units actually available to lease. Loan covenants and management reports should state which convention they use, since the two methods on the same building can differ by several percentage points.
Why can a fully occupied building still lose money?
Because physical occupancy only counts signed leases, not rent actually collected. A building could show 100% occupancy while several tenants run months behind on rent or leases were signed at a discount to fill space fast — economic occupancy, which weights each unit by rent collected against market rent, is the number that catches that gap, and physical occupancy alone will not.
What occupancy rate do lenders typically want to see?
Multifamily lenders commonly underwrite around a breakeven occupancy in the 80-85% range, meaning rental income could fall to roughly that level before it stopped covering debt service and operating costs — that threshold is set in the loan documents, not produced by this formula. A property running at 95% occupancy carries a comfortable buffer above a typical breakeven line; one running near breakeven carries almost none.
References
- IRS — Residential Rental Property (Publication 527)
- SEC Investor.gov — Real Estate Investment Trusts (REITs)
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.