Vacancy deduction?
I recently started my career in a commercial real estate firm. I was going over a BOV and came across a line in the pro forma that said "10% vacancy deduction". Is this a tax expense or some other kind of expense? please elaborate. Thank you! :) 
[{"id": "c7bp2f8", "text": "I am a commercial appraiser in Austin, TX. The vacancy loss accounts for typical market vacancy. When analyzing potential income, you have to acknowledge that the property is not going to be 100% leased into perpetuity. If you are looking at a single tenant building, a 10% vacancy loss might indicate that the analyst feels that market leases are five years (60 months) and that between leases, it will take six months to market and re-lease (6 / 60) where the owner will receive no rental income. ", "replies": [{"id": "c7bq9y7", "text": "^ This pretty much.\n\nSingle tenants are funny situations where you are likely either fully leased or 0% leased.  For that reason I would suggest doing a DCF on single tenants, but it is obviously situational.  I think the OP needs to realize that all these tools for valutations are just that tools, and there are many of them that you can use and see if they all make sense together to pass the \"sniff test\".\n\nThe one thing to watch out for re: vacancy is when using market or current vacancy is if you have data for the market (often times it can be harder to find this for smaller markets), for that that reason it is useful to document what your assumptions are for vacancy, and what data supports your reasoning.", "replies": [], "depth": 2}, {"id": "c7eaxvg", "text": "The investment grade debt rating of said tenant can also be used in this analysis. A tenant like CVS is going to get very favorable UW treatment with respect to vacancy loss. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "c7bqv2t", "text": "Thank you, this was very helpful! ", "replies": [], "depth": 1}]