What are Rentable vs Non-Rentable Units?

Rentable vs. Non-Rentable Units in Multifamily Real Estate

In multifamily real estate, rentable units and non-rentable units categorize the total unit mix in a property based on their ability to generate rental income. The distinction is critical for evaluating a property's occupancy, financial performance, and overall asset valuation.

1. Rentable Units

These are units that are actively available or intended for leasing. Rentable units include:

Leased Units – Occupied by tenants paying rent.
Vacant Market-Ready Units – Move-in ready units actively being advertised for lease.
Vacant Lease-Up Units – In newly built properties, these are available for rent but may still be in the initial lease-up phase.
Model Units (if leased periodically) – Sometimes, a model unit may be leased on a short-term basis when needed.

Rentable Unit Count Considerations

Some properties might count all physical units as rentable even if a few are temporarily out of service (e.g., minor repairs).
The total number of rentable units impacts economic occupancy, which accounts for actual revenue collected versus potential revenue.

2. Non-Rentable Units

These are units that cannot be leased, either temporarily or permanently, due to various factors. Non-rentable units include:

Down Units – Units needing significant repairs or renovations, making them uninhabitable.
Administrative or Employee Units – Apartments used as housing for on-site staff, such as maintenance personnel or property managers.
Model Units (if never leased) – If permanently staged for marketing purposes.
Office or Storage Units – Apartments converted into leasing offices, community spaces, or storage.
Affordable Program Restrictions – Some units in Low-Income Housing Tax Credit (LIHTC) or similar programs may be reserved but not counted as rentable in specific reporting methods.

Non-Rentable Unit Impact

A high number of non-rentable units reduces the effective occupancy and the revenue potential of a property.
Properties with a significant number of down units may require repositioning or capital improvements to restore full rentability.

Key Takeaways

Rentable Units = Units that generate revenue or are actively marketed for lease.
Non-Rentable Units = Units that cannot generate rental income due to various reasons.
The difference affects occupancy calculations, financial modeling, and underwriting decisions.
Understanding these metrics is essential for property managers, investors, and lenders evaluating asset performance.