So, you’re feeling a bit confused about the different types of occupancy. You’ve heard about physical and economic occupancy, but you don’t know how to define them. Well, guess what? I’m going to simplify and clarify everything for you today!

I recently had a call with one of my students where we were going through everything related to a particular opportunity he’s been looking at. While we were doing this, we realized there was a question around occupancy. If I asked about the occupancy rate, and my student would tell me there’s a 5% or 6% occupancy, but when I asked how many of those people were actually paying 100% of the rate, there would be silence. He wasn’t sure. So, I decided I should share more about this in order to make everything crystal clear.

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It’s always important to do your due diligence and look at the different types of expenses related to your property. When you look at occupancy, you want to see if there’s someone in a particular unit. If you have a 10-unit apartment building, and every single one of the units has a resident in it, then you are at 100% physically occupied.

However, we know, as investors, that you’re here to make sure you’re purchasing streams of income for the future. So, if someone is in the unit but they’re not paying, that creates a headache for you. It might force you or your team to go out and collect funds or take legal action. So, while the unit is physically occupied, it doesn’t necessarily mean you’re making money.

Therefore, it’s important to also understand your economic occupancy. If you have 10 people in your 10-unit apartment building, but only half of the people have paid rent, you might be at 100% physically occupied, but you’re only at 50% economically occupied. This can cause a lot of problems because you won’t just be trying to collect rent from one person who hasn’t paid, but from five.

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As you can imagine, these numbers not only affect your bottom line, but they will also affect your credibility as an investor when you’re talking to your team, your broker, etc.

Let me know if you have any questions about the difference between physical and economic occupancy. You can leave them down below.

For those who don’t know me, I’m Billy Keels with KeePon Cashflow. I like to share a number of different strategies and tips for how you can make more money, have control over your free time, and ultimately live with less stress.

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That’s my two cents for today.

Make it a great day!
bK

 

You can also check out my latest podcasts and collaborations here keeponcashflow.com/podcasts/