Inside Vacancy and Collection Losses

It's conventional wisdom. When an Income Analysis, or Operating Statement, is composed, appropriate method is to take out a factor for vacancy and collection losses. In the context of Florida property taxes, this is what it means - even for net leases.

Florida property tax income analysis intends "UNencumbered fee simple" status. And unencumbered means except for four powers of government. The practical result is an empty building, for assessment purposes.

So, an immediate question is how long will it take to rent this space? Then, how much rent will NOT be collected? And, how much in operating expenses will Landlord have to pay because costs are NOT passed through to a tenant during the dark period?

We calculate the percentage involved in time by dividing the year or percentage of the year into the anticipated full term of a lease. For example, say a 20-year lease, and 1 year of vacancy. Divide 240 into 12, and the result is 5%. If it takes two years to lease, divide 240 months (a 20-year lease) into 24 (2 years to market) , and the percentage is 10%.

Then apply the percentage to projected rent, and to projected operating expenses. Subtract from revenue in the Income Statement.


Do you want to lower your property taxes? Ad valorem taxes are based upon valuation methods, modified by state laws and regulations. CPS knows due process procedures and value applications should be applied to your real and tangible taxes. If you have a question, or need professional services, contact CPS at 1-305-372-9200.