What are Absorption Rates Used for in Multifamily Real Estate?

When trying to measure the level of demand in a rental market, real estate professionals use absorption metrics. The absorption rate is used to measure real estate demand because it tells us how long it takes for units to rent in a certain real estate market. When facing low or negative absorption markets, operators may have to reduce the rental price or offer concessions to attract a renter. When facing high absorption markets, operators can up the asking price without turning renters away.

Real estate groups like QC Capital rely on metrics like this to determine how hot or cool a market is. Thankfully, the calculation for this rate isn’t too difficult. Take the total number of units rented in the market and divide it by the total number of available units for lease. The result is the rate of absorption. This number shows the rate at which all of the current properties on the market are being rented.

A good absorption rate depends on what your position in the real estate market is. After all, you want to find the right real estate market to invest in, one where you have an advantage. Asking what the rate of absorption will let you know where you stand in the real estate market.

If you are an accredited investor interested in learning more about investing in fundamental real estate deals or looking to discuss current market conditions, please contact us or visit our website at www.QCCapitalGroup.com. QC Capital only offers 506(c) opportunities meant for accredited investors only.