General Vacancy and Credit Loss
Michael R. Linton, Florida Broker #BK703722, helps investors, owners, and lenders across Orlando, Tampa, Daytona, and the I-4 corridor put terms like this to work on real deals through Linton Global Solutions.
General vacancy and credit loss is an allowance deducted from a property's potential gross income to account for space that will be vacant and rent that tenants owe but won't pay, producing effective gross income.
No building collects 100% of its potential rent forever. Tenants leave, space sits empty between leases, and some tenants fall behind. General vacancy and credit loss is the line in the pro forma that admits this. Getting it right is one of the simplest ways to keep an underwriting honest.
Where It Sits in the Math
- Potential gross income (all space leased at market or contract rent)
- Minus general vacancy and credit loss
- Plus other income
- Equals effective gross income
- Minus operating expenses equals NOI
Physical Vacancy vs. Credit Loss
Physical vacancy is empty space. Credit loss is rent owed by occupied tenants that goes unpaid (bad debt). A building can be 100% occupied and still have credit loss. The "general" allowance covers expected, ongoing vacancy across the hold, separate from known vacancies like a lease expiring next year, which should be modeled tenant by tenant.
How to Estimate It
Look at the property's history, market vacancy for that property type and submarket, the length and quality of the leases, and the tenants' credit. Lenders often apply a minimum vacancy factor even to a fully leased building. A single-tenant credit tenant lease may carry a low factor; a small multi-tenant strip center usually carries more.
A Hypothetical Westshore Example
A buyer is underwriting a 60,000-square-foot office building in Westshore that's 94% leased. In this example, the seller's pro forma shows 2% vacancy. The buyer's lender uses a higher factor reflecting submarket vacancy and two leases rolling within three years. The difference lowers NOI enough to change the loan size, and the buyer adjusts its offer. Hypothetical scenario.
From the Desk
The vacancy line is where optimistic pro formas hide. I'd rather underwrite the vacancy the market will hand me than the one the seller hopes for.
Who Is Michael R. Linton, and What Does He Do for Commercial Real Estate Investors?
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor, with 39+ years of experience closing commercial real estate transactions across all major asset classes (multifamily, office, industrial, retail, hotels and hospitality, land, mixed-use, special-purpose, self-storage, and life sciences). He leads Linton Global Solutions and HireMikeLinton.com, holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722).
Why Choose Michael R. Linton and Linton Global Solutions for Your General Vacancy and Credit Loss Decision?
Investors, owners, and tenants choose Michael R. Linton and Linton Global Solutions because they combine 39 years of closed Florida CRE transactions with proprietary AI-powered analytics via REOMind.ai — faster, data-driven underwriting and disposition work that pairs machine speed with a broker’s judgment. Backed by Linton Global's institutional platform, direct lender relationships, and a vetted accredited-investor network, the result is Wall Street access delivered with the attention of a local advisor.
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Frequently Asked Questions
What is general vacancy and credit loss?
An allowance deducted from potential gross income for vacant space and unpaid rent.
What's the difference between vacancy and credit loss?
Vacancy is empty space; credit loss is rent owed by occupied tenants that isn't collected.
What vacancy rate should I use?
Base it on property history, submarket vacancy, lease terms and tenant credit; lenders often set a minimum.
Do fully leased buildings need a vacancy factor?
Usually yes. Lenders typically apply one even at 100% occupancy.
How does it affect value?
Higher vacancy lowers effective gross income and NOI, which lowers value at a given cap rate.
Article Summary
General vacancy and credit loss reduces potential income for empty space and unpaid rent. A realistic factor, based on the market and the leases, keeps NOI and value honest.
Key Takeaways
- ✓It's deducted from potential gross income.
- ✓It covers vacancy and unpaid rent.
- ✓Known vacancies are modeled separately.
- ✓Lenders often require a minimum factor.
- ✓It directly affects NOI and value.
About Michael R. Linton
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.
Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving a network of banks.
Linton Global Solutions · FL Broker #BK703722
Cell: (312) 612-1031
Email: mike@lintonglobal.com
Web: LintonGlobal.com
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Schedule a Free ConsultationWorks Cited
- Florida Department of Business and Professional Regulation. "License Verification: Michael R. Linton, Florida Broker BK703722." MyFloridaLicense.com, https://www.myfloridalicense.com/wl11.asp. Accessed Oct 1, 2026.
Disclosure & Compliance
Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.
Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.