Real Estate Break-Even Analysis
Calculates a rental property's monthly cash flow after a vacancy allowance, the mortgage payment, operating expenses and a maintenance reserve, so you can see whether the property clears its break-even point. The explanation shows how to turn the same inputs into the break-even ratio lenders use.
Last updated: September 2026
Formula below · 2 sources (CFPB, Wikipedia) · Updated Sep 2026
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About this calculator
This calculator returns the monthly cash flow at your chosen vacancy allowance: Cash Flow = Monthly Rent × (1 − Vacancy %) − Mortgage Payment − Operating Expenses − Maintenance Reserve. A positive number means the property is above break-even at that vacancy level; a negative number means you must subsidize it. Lenders often express the same idea as the break-even ratio (BER), the occupancy at which rent exactly covers all obligations: BER (%) = (Mortgage Payment + Operating Expenses + Maintenance Reserve) ÷ Monthly Rent × 100. With the default inputs the obligations are $2,150 + $650 + $200 = $3,000 against $3,200 of rent, a BER of 93.75%, so the property breaks even only above about 94% occupancy and the 5% vacancy allowance leaves just $40 a month. Most lenders prefer a BER below 85%, which leaves room for at least 15% vacancy. Unlike cap rate, BER includes debt service, so it is sensitive to the financing.
How to use
A rental brings in $2,500 a month; the mortgage payment is $1,500, operating expenses (tax, insurance, management) are $500, and you set aside $100 for maintenance. Choose a 10% vacancy allowance. Cash flow = $2,500 × 0.90 − $1,500 − $500 − $100 = $2,250 − $2,100 = $150 a month. Break-even ratio = ($1,500 + $500 + $100) ÷ $2,500 = 84%, so the property can tolerate about 16% vacancy before cash flow turns negative — within the 85% most lenders want.
Frequently asked questions
What break-even ratio do lenders consider acceptable for investment properties?
Most commercial and investment-property lenders prefer a break-even ratio of 85% or below, meaning the property can withstand up to 15% vacancy before cash flow goes negative. Some conservative lenders set the threshold at 80%. A lower BER provides greater resilience against rent drops, vacancy spikes, or unexpected repairs, which is why it is a standard underwriting metric alongside debt-service coverage ratio (DSCR).
How does break-even ratio differ from debt-service coverage ratio?
Break-even ratio expresses obligations as a percentage of income, while debt-service coverage ratio (DSCR) expresses income as a multiple of debt obligations (DSCR = NOI / debt service). A BER of 80% corresponds roughly to a DSCR of 1.25 on the NOI portion. Both metrics assess financial resilience, but BER is broader because it includes operating expenses in the numerator, not just debt payments.
Why is a low break-even ratio important during economic downturns?
During recessions or local market softening, vacancy rates can rise sharply and achievable rents may fall. A property with a 95% BER has almost no cushion — any vacancy or rent reduction immediately produces negative cash flow. Conversely, a property at 75% BER can absorb significant disruption while still servicing its debt. Stress-testing your BER against a 10–20% rent reduction scenario before purchasing is a prudent practice for any rental investor.