PlatwrightBreak-even rent
How much rent you need to break even, with every cost counted
Break-even rent is the monthly rent at which a property pays for its loan and its running costs and leaves nothing over. Above it you have cash flow. Below it you are paying to own the place.
The quick way to estimate it assumes half the rent goes to expenses, and the break-even rent calculator does that in a few seconds. This page does the longer version, built from the costs you actually pay. That is the number to use once you own the property or are about to.
Break-even rent, a month
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The rent at which collected income exactly covers the loan payment and every cost above.
Room at today's rent
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How far the rent can fall before that point, or how far short it is today.
Loan payment, a month
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Principal and interest only.
Cash flow at today's rent, a month
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What is left after the loan and every cost above.
Nothing here is sent anywhere and nothing is stored. The figures loaded are Maple Street Duplex from the Rental Property Analyzer. The fixed costs are its taxes ($3,420), insurance ($1,680), water and trash ($1,020) and legal and accounting ($250), added up for the year.
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 formula
Some costs stay the same whatever the rent is, such as taxes, insurance and the loan payment. Others move with the rent. Vacancy takes a share of it, and management, repairs and leasing are budgeted here as shares too. So the break-even rent is the fixed costs divided by the part of each rent dollar that survives the variable ones.
Break-even rent = (fixed costs + loan payment) / ((1 - vacancy) x (1 - percentage costs) - leasing share).
Worked through on the duplex
- Loan payment: $1,386.38 a month. $213,750 borrowed at 6.75% for thirty years.
- Fixed costs: $530.83 a month. $6,370 a year of taxes, insurance, water and trash and accounting.
- What survives of each rent dollar: 70.1 cents. 95 cents after 5% vacancy, 78% of that after 22% for management, repairs and a CapEx reserve, then 4 cents less for leasing.
- Break-even rent: $2,734.97 a month. $1,917.21 divided by 0.701.
- At $3,200 the room is 14.53%, and the cash flow is $326 a month, the same figure the Rental Property Analyzer shows for this property.
Why this is lower than the quick version
The 50% shortcut puts this duplex's break-even at $2,773. Counting the actual costs gives $2,734.97. On this property the shortcut is slightly cautious. On a building with a high tax bill or an HOA it can be optimistic, and then the long version is the one that tells you the truth.
Neither number includes a cushion for a roof that fails in year two. That is what the CapEx share is for, and it only works if it is set honestly: CapEx vs maintenance explains how to size it.
The same floor, in three scenarios
The Rental Property Analyzer works this out for one property with up to eight units and then shows what happens to the cash flow when rent falls and costs run over, side by side with your base case. It works in Excel and Google Sheets.
- Five properties at once, with the quick version of this number for each: the free Deal Screener.
This guide is a screening aid, not financial, tax, or legal advice. The numbers are only as good as what you put in. Verify with a qualified professional before you buy anything.