Renting Out: How to Calculate Your Occupancy Rate, and Why It Matters

In today’s housing market, it can be a challenge to turn a profit from short-term rentals. To ensure you are covering expenses and turning a profit, you will want to know your occupancy rate.

This means knowing how often your space is rented versus vacant in a given month. Measuring occupancy is an important metric because it gives you an insight into whether your rental space can support the effort involved in managing it.

Keep reading to learn how to calculate occupancy rate and its impact on your lease business.

What Is Occupancy Rate?

The occupancy rate of a building is the ratio of rented space to the building’s total square footage. Hospitals, hotels, flats, and assisted living facilities all use the term “occupancy rate” to measure how many residents are currently living there. 

The success or failure of a rental property can often be gauged by its occupancy rate. As an example, if a hotel has low occupancy rates all the time, it could be an indication of serious issues that turn off potential guests.

Comparing the facility’s occupancy rate to that of its rivals or seeing how different pricing or advertising approaches affect revenue are some possible uses for this metric.

How to Calculate Occupancy Rate

To calculate your occupancy rate, you need to take the number of occupied rooms and divide it by the total number of rooms available. For example, if there are 100 rooms available and 80 of them are occupied, then the occupancy rate would be 80%.

Why Does Occupancy Rate Matter?

All else being equal, properties should try to lower their rate of vacancy over time in order to optimize operating efficiency and maximize rental income. Fewer vacancies are equal to more rental income; while greater vacancy is decreased rental income.

A property’s occupancy rate is just one indicator of its profitability for investors, but it shouldn’t be the only one. The following are examples of some of the most significant influences affecting vacancy and occupancy rates:

  • Location
  • Advertising for Rental Properties
  • Property Condition
  • Methods of Property Administration
  • Rent Costs
  • Need in the Rental Market

If you own one or more properties and want to make more money by renting them out for short periods of time, go here.

A Quick Tip to Increase Occupancy Rates

The rental owners want to increase the occupancy rate, so how can more reservations be made? While simultaneously tempting consumers to book, promotions and bundles serve to conceal the actual cost of the rooms.

The baby boomer generation, as well as business travelers, are attractive demographics to target during the week to fill rooms. Weddings and other cultural events can also help increase occupancy levels.

Check Your Rental Property Profitability

It’s crucial to calculate the occupancy rate as it’s a key indicator of how profitable your rental property is.

If your occupancy rate is low, it’s time to take a look at your rental price, your marketing strategy, and your property itself to see what changes you can make to attract more tenants.

If you enjoyed this article, check out the rest of our blog for more money-making solutions.

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