What is a typical allowance for collection loss in major cities for retail units and residential apartment units?

[shan53]

Hi Guys,

What is a typical allowance for collection loss in major cities for retail units and residential apartment units (% of potential gross income)?

Thanks!

 

[Fernando]

Hi Guys,

What is a typical allowance for collection loss in major cities for retail units and residential apartment units (% of potential gross income)?

Thanks!

In general, residential apartments can be rented out faster thus higher loss can be shortened.
Commercials can stay vacant for long time. If tenant can't pay, it's difficult to find a new tenant quickly. Best to negotiate a new contract where tenant can pay.
There are commercial stores vacant for over 6 years near my properties.
Don't know how realistic commercial appraisers are dealing with commercial vacancies.

 

[George Hatch]

Vacancies vary by property type and location. Just like everything else in real estate. The most relevant vacancy rates will be the ones coming from your most similar properties. If you're appraising a 4-un then it doesn't matter what the vacancy rate is for the 250 unit full service apartment property that's located next door because they're not directly competing with each other for tenants.

 

[KHS445]

My markets are fairly small and probably 90+% of the commercial properties are owner occupied. Some single units, some large national chains anchoring a strip mall and a few unanchored strip malls. Generally I look at the market and do a quick comparison of available properties, asking rates and terms, length of vacancy and then consider the stability, occupancy length and current lease terms. After that it is just kind of a best guess. No one can predict the future so the best one can do is gather as much information as they can and then make an educated guess.

Keep in mind you are figuring vacancy based on a current rent structure. If the rent is lowered or increased and if it changes from NNN to gross, your vacancy and collection rate will change.

 

[Terrel L. Shields]

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