PlatwrightBreak-even rent
How far the rent can fall before a deal stops working
Most first-pass filters answer "does this cash flow?" with a yes or a no. That is the wrong shape of answer, because two properties can both say yes and have completely different amounts of room underneath them.
The useful question is how far the rent can drop before the answer changes. Here is how that number is built, and what it does to a first look at a deal.
Break-even rent
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Below this rent the property stops covering the loan payment and the operating expenses you assumed. Taxes, insurance and HOA only count if you folded them into that expense share.
Room left
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How far the rent can fall before that happens, or how far short it is today.
Monthly cash flow
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What is left after the loan payment and the expense share you set above.
Rent to price
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Monthly rent as a share of the price. Most people look for 1%.
Nothing here is sent anywhere and nothing is stored. Change a figure and the four results follow. The expense share starts at 50% because that is the screening rule this page is built on, and you can move it once you know your actual taxes and insurance. The payment behind these figures is principal and interest only.
This calculator is a screening tool, not financial, tax, or legal advice. Results are estimates based on the numbers you enter. Verify with a qualified professional before making any purchase, financing, or tax decision.
The arithmetic, on one property
A $285,000 duplex, asking $3,200 a month, with 25% down: $213,750 borrowed at 6.75% over thirty years, which is $1,386 a month of principal and interest.
- The screening assumption. On a first pass, before you have any real numbers for this building, half the rent goes to operating expenses. It is the oldest rule in the category and it exists precisely because you do not yet know the taxes, the insurance or the roof.
- So the break-even rent is the rent at which the other half exactly covers the mortgage. $16,636.54 of annual debt service, divided by six, is $2,773 a month.
- The room is the gap. $3,200 asking against $2,773 break-even leaves $427, which is 13.35%. The rent can fall by an eighth before this property stops paying for itself.
Thirteen percent is a real answer, and it is a different answer from "yes, it cash flows". A property with 2% of room and one with 25% both pass a yes-or-no filter.
The other number on a first pass
Rent to price — 1.12%. $3,200 of monthly rent against a $285,000 price. The usual reference is 1.00%, so this clears it, with very little to spare.
It is a crude number and it is meant to be: it uses no expenses, no financing and no assumptions. That is exactly what makes it useful at the stage where you are deciding which of five listings deserves an evening.
Where the 50% rule stops being enough
It is a filter, not an analysis. Half the rent is a reasonable guess across many properties and a bad one for any particular property: a new build with low taxes and no management is nowhere near 50%, and an old triplex with a management company and a capital reserve can be well past it.
So the honest order is: screen with the rule, then analyze the survivors with their own numbers — real taxes, real insurance, real vacancy, a real reserve. The screening number tells you where to spend the evening. It does not tell you to buy anything, and nothing here approves a property.
The other worked examples
Each file on this site carries a worked example already loaded, and each one has its arithmetic written out in full:
- Cap rate calculator — what a property earns before the loan — the other half of a first pass, with no mortgage in it.
- Vacancy cost calculator — what an empty month costs — and whether a rent cut would be cheaper than holding out.
- All three, with what each one leaves out
- How to run a duplex through a spreadsheet — one property, worked from the six numbers you type down to the four that decide.
- Break-even rent calculator — run your own numbers — break-even rent, and the free first-pass filter.
- Where a landlord year actually goes — twelve categories, and what each one took.
- A short-term rental year, measured in nights — occupancy, ADR, RevPAR, and what was kept.
- Five properties on one page — the portfolio view, and the vacancy column.
The file this comes from — and it is free
These figures are the worked example loaded in the Deal Screener, recalculated from the file. It puts five properties side by side on exactly this filter — cash flow, cap rate, break-even rent and how far the rent can fall — so you can throw out the ones that do not survive before spending an evening on any of them.
It costs nothing.
- Get the Deal Screener — free
- When a property survives the filter, the Rental Property Analyzer is where it gets its real numbers. See the Rental Property Analyzer
This template is a calculation tool, not financial, tax, or legal advice. Results are estimates based on the numbers you enter. Verify with a qualified professional before making any purchase, financing, or tax decision.