The empty month: a landlord's biggest cost that nobody writes down

Why the gap between tenants costs Riga landlords more than tax or repairs, and why it so rarely gets noticed. Calculations, official statistics and behavioural economics research.

Key points

1. One empty month is 8.3% of a year's gross rent. In our model of a central Riga flat it takes about 16% of the year's net income.
2. One empty month costs more than the whole year's 10% income tax on the same flat.
3. Research since 1980 shows people weigh income they never received less than money they paid out. Vacancy is exactly that kind of loss: it never shows up on a bill.
4. Asking €50 more only pays off if it adds no more than about 20 days of vacancy.

The month that wipes out the profit

Letting a flat in Riga is still profitable. Global Property Guide data from April 2026 put the average gross rental yield in Riga at 7.47% a year. The median asking rent for a one-bedroom (two-room) flat in central Riga is €800 a month ¹. But a gross yield assumes the flat is let for all 12 months. The same source notes that net yields are usually 1.5 to 2 percentage points lower ¹.

The arithmetic is simple. Every month without a tenant is 1/12, or 8.3%, of a year's gross income. Costs do not stop in an empty month, though: the building management fee, the repair fund and, in the heating season, heat all stay with the owner. Measured against net profit, an empty month weighs far more than 8.3%.

In our model (assumptions at the end) a two-room flat in central Riga at €800 a month earns about €6,720 a year after costs and tax. One empty month, with cleaning and listings, cuts that by about €1,100. Two months cut it by about €1,900. Three months cut it by about €2,700, which is 40% of the year's profit.

Compared with the costs we do see

Landlords usually watch what arrives as a bill: tax, repairs, the management fee. A private individual in Latvia can pay 10% personal income tax on rent received. Only real estate tax may be deducted from that income; other expenses cannot ¹⁰¹¹. In our example the tax comes to at most €960 a year.

Now compare vacancy. One empty month costs about €1,100, more than the whole year's tax. Because the 10% regime allows no expense deductions, utility bills for an empty flat do not reduce the tax at all. The only relief is that rent you never received is not taxed.

This is not only a Riga finding. In the US National Apartment Association (NAA) income and expense survey, losses to vacancy are the largest category of “economic losses”, larger than tenant concessions and bad debt ⁵. Professionally managed portfolios track this line every month. A private landlord's records usually have no such line at all.

Why landlords miss it

If vacancy is so expensive, why does it come up less often than a broken washing machine? Research points to three reasons.

1. Missed income does not hurt like a payment

Nobel laureate Richard Thaler described in 1980 how people weigh opportunity costs, meaning income they forgo, less heavily than out-of-pocket costs of the same size ⁶. In 2009 Frederick, Novemsky and colleagues showed experimentally that people often fail to consider what a decision rules out unless someone points it out to them ⁷. An €800 repair bill hurts. €800 of rent that simply never arrived goes unnoticed.

2. Records do not show what is missing

Under the 10% regime a landlord records income. An empty month is a month with no entry. There is no minus in the account, only a missing plus. Without a “days without a tenant” measure, the loss appears in no report and there is nothing to compare it with next year.

3. Fear of loss makes owners hold their price

Studying condominium sales in Boston, Genesove and Mayer found that sellers facing a loss set higher asking prices and sold markedly more slowly. The effect held for investors too, not only for owner-occupiers ⁸. In the rental market Genesove found that nominal rents are sticky: in US data from 1974 to 1981, 29% of units saw no change in rent from one year to the next, and the rigidity was higher in small buildings ⁹. In practice, the landlord waits for “their price”, and every week of waiting quietly costs money.

The price-holding trap

Say the market values a flat at €800 and the owner wants €850. If the higher price makes the search longer, how long can the owner wait before it stops paying off?

Under our assumptions each empty day costs about €26 (daily rent after tax plus upkeep). An extra €50 a month brings €540 over a year after tax. So +€50 only pays off if the extra vacancy stays under about 20 days. For +€25 the limit is about 10 days; for +€100 it is about 41 days.

In Riga timing matters too. Industry specialists say demand peaks in July, August and September, when students and foreign staff arrive, while winter and early spring are the quietest period ¹⁴. If a higher price pushes a flat from August into October, the next tenant has to be found in a slower market, and the next lease may end off-season again.

What the market data show

We found no official, regularly published rental vacancy rate for Riga. The closest official figure is the 2021 census: 15% of conventional dwellings in Riga were not anyone's usual residence ². That is not the same as rental vacancy, since it includes second homes and dwellings of non-residents. It does show that a large share of the capital's housing stands unoccupied. Industry estimates put long-term rental vacancy in Riga at around 5%, or about 18 days a year ¹⁵.

The US has longer official series. There, the rental vacancy rate was 7.3% in the second quarter of 2026, against 5.6% in 2022 ³. A rate of 7.3% means the average rental home stands empty about 27 days a year. RealPage data show that one turnover between tenants now takes 34.4 days on average, almost five days longer than in early 2020, and those extra days alone cost about $275 per unit ⁴.

Both markets point the same way: even in well-run portfolios, vacancy is not an exception. It is a regular, measurable cost line. The only difference is whether anyone measures it.

How to measure and shorten vacancy

Vacancy cannot be removed entirely, but it can be shortened. The first step is making it visible.

• Count the days. Occupancy = let days ÷ 365. Record how long each turnover took, from move-out to the start of the next lease.
• Start marketing as soon as notice arrives. Viewings while the current tenant is still in can cut the gap to a few days.
• Price to the market, not to hope. Compare with similar listings and how long they stay up. If 10 to 14 days bring no serious enquiries, review the price.
• Time lease ends for the high season. An 11 or 13 month lease can move the next turnover to late summer.
• Reply fast. An applicant who hears back the next day is often already viewing another flat.
• Keep good tenants. Every renewal is a turnover that does not happen: no vacancy, no cleaning, no listings.

Quick formulaVacancy cost = empty days × (daily rent × 0.9 + daily upkeep) + turnover costs

Methodology and assumptions

• Flat: two rooms, ~50 m², central Riga, €800/month (Global Property Guide median for the centre, April 2026 ¹).
• Tax: 10% personal income tax on rent received ¹⁰. No tax is due on rent not received. Real estate tax is left out of the calculation.
• Upkeep of an empty flat: €80/month averaged over the year (management fee ~€0.58–0.70/m² excl. VAT per Colliers ¹², repair fund, heating in season at the Rīgas siltums tariff ¹³). This is an assumption.
• Turnover costs: €300 (cleaning, small repairs, listings). Assumption.
• Annual net income: 70% of gross, with costs and tax taken as ~30% (industry range 25–40% ¹⁵).
• US data serve as a benchmark because we found no comparable official series for Latvia. The percentages cannot be applied to Riga directly.
• This article is for information only and is not financial or tax advice.

Sources

1. Global Property Guide. Gross rental yields in Latvia: Riga and Jūrmala (Q2 2026, atjaunots 2026-04). https://www.globalpropertyguide.com/europe/latvia/rental-yields
2. Centrālā statistikas pārvalde. Mājokļa vidējā platība uz vienu iedzīvotāju palielinās (2021. gada tautas un mājokļu skaitīšana), 24.11.2021. https://stat.gov.lv/lv/statistikas-temas/iedzivotaji/majokli/preses-relizes/7126-majoklus-raksturojosie-raditaji-2021-gada
3. U.S. Census Bureau. Quarterly Residential Vacancies and Homeownership, Second Quarter 2026 (28.07.2026); vēsturiskie dati: Q2 2025 relīze. https://www.census.gov/housing/hvs/current/index.html
4. RealPage Analytics. Average Vacant Days Increases Nationwide, 17.02.2025. https://www.realpage.com/analytics/vacant-days-climbs/
5. National Apartment Association. NAA 2021 Survey of Operating Income & Expenses in Rental Apartment Communities. https://naahq.org/naa-2021-survey-operating-income-expenses-rental-apartment-communities
6. Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39–60. https://www.sciencedirect.com/science/article/abs/pii/0167268180900517
7. Frederick, S., Novemsky, N., Wang, J., Dhar, R., Nowlis, S. (2009). Opportunity Cost Neglect. Journal of Consumer Research, 36(4), 553–561. https://doi.org/10.1086/599764
8. Genesove, D., Mayer, C. (2001). Loss Aversion and Seller Behavior: Evidence from the Housing Market. Quarterly Journal of Economics, 116(4), 1233–1260. https://doi.org/10.1162/003355301753265561
9. Genesove, D. (2003). The Nominal Rigidity of Apartment Rents. Review of Economics and Statistics, 85(4), 844–853. https://www.nber.org/papers/w7137
10. Finanšu ministrija. Īpašie nodokļu režīmi (10 % IIN no ienākuma no īpašuma). https://www.fm.gov.lv/lv/ipasie-nodoklu-rezimi
11. Valsts ieņēmumu dienests. Pirmie soļi nekustamā īpašuma izīrētājam (atjaunots 21.07.2026). https://www.vid.gov.lv/lv/pirmie-soli-nekustama-ipasuma-iziretajam
12. Colliers Latvia. Cik vidēji maksā jaunbūves un vecās ēkas iedzīvotājs par komunālajiem izdevumiem? https://www.colliers.com/lv-lv/news/differences-in-maintenance-costs
13. AS „Rīgas siltums”. Siltumenerģijas tarifs (no 01.10.2026 – 80,96 EUR/MWh bez PVN). https://www.rs.lv/saturs/rigas-siltums-siltumenergijas-tarifs
14. LSM. Studenti „uzkarsē” īres tirgu, 04.08.2023; LSM. Kā dzīvo un iztiek mūsdienu studenti Rīgā, 21.06.2024. https://www.lsm.lv/raksts/zinas/ekonomika/04.08.2023-studenti-uzkarse-ires-tirgu.a518855/
15. Investropa. Riga rental yields (2026); Buying and Renting Out in Latvia (2026). Nozares aplēse, nav oficiālā statistika. https://investropa.com/blogs/news/riga-rental-yields