What is a consequence of not adjusting for vacancy when calculating income for rental property?

When calculating the income for rental property, failing to adjust for vacancy can lead to overestimating potential income. This is because the calculation assumes the property will be fully rented without accounting for the reality that there may be periods where the property is unoccupied. Vacancy rates vary based on location, property condition, and market demand, and unless these factors are considered, the projected rental income can be inflated.

By not applying an appropriate vacancy rate, the income figure presented does not reflect true earning potential, which can impact investment decisions, financing projections, and overall financial analysis. Accurate income projections should always factor in an expected vacancy allowance to provide a realistic view of the property's financial performance.