Free Break-Even Occupancy Calculator (No Signup)

Rent has to come in at 97.0% of its full potential to cover $44,244 of costs and debt service, which leaves room for 3.0% vacancy against the 5.0% budgeted.

Occupancy the building needs against the occupancy you expect

share of full rent collected

Expected 95.0%Break-even 97.0%

50.0%100.0%

The math, with your numbers

Gross potential rent$45,600Monthly rent × 12$3,800 × 12

Debt service$27,144Mortgage payment × 12$2,262 × 12

Costs to cover$44,244Operating costs + debt service$17,100 + $27,144

Break-even occupancy97.0%Costs to cover ÷ gross potential rent$44,244 ÷ $45,600

Cash flow at expected vacancy−$924Gross potential rent × expected occupancy − costs to cover$45,600 × 95.0% − $44,244

DSCR0.97NOI ÷ debt service$26,220 ÷ $27,144The same coverage question in lender units.

Operating costs leave out capital spending. A building that breaks even here is covering the mortgage, not the next roof.

How this calculator works

Break-Even Occupancy = (Operating Expenses + Annual Debt Service) ÷ Gross Potential Rent. On the $425,000 duplex: $17,100 of operating expenses plus $27,144 of debt service is $44,244, against $45,600 of gross potential rent. $44,244 ÷ $45,600 = 97.0%.

That result is the occupancy at which cash flow is exactly zero. Above it the property funds itself, below it the owner writes a check. Stated the other way, this duplex tolerates 3.0% vacancy before going cash-flow negative, which is less cushion than the 5% vacancy the same underwriting treats as normal. The contradiction between those two numbers is the deal telling you something.

Key insights

Break-even occupancy carries the same information as DSCR, expressed in units an owner actually experiences. A 0.97 DSCR and a 97.0% break-even describe one condition, but the second one answers how many empty months it takes to get there.

On a two-unit building, occupancy does not move continuously. One vacant unit is half the building for the length of the turn, so a single vacant month in either unit puts the year at 95.8% and below the 97.0% the deal needs.

This metric uses operating expenses, so it inherits their exclusion of capital spending. A building at 97.0% break-even is covering taxes, insurance, management, and the mortgage. It is not covering a furnace.

Leverage moves this number far more than operations do. At 50% down, annual debt service falls to $16,965 and break-even occupancy drops from 97.0% to 74.7%, on identical rents and identical expenses.

Frequently asked questions

What is the break-even occupancy formula?›

Break-Even Occupancy = (Operating Expenses + Annual Debt Service) ÷ Gross Potential Rent. On this duplex, ($17,100 + $27,144) ÷ $45,600 = 97.0%. Gross potential rent means fully occupied at market rent, before any vacancy deduction.

What is a healthy break-even occupancy?›

Lower is safer, and the number that matters is the gap between it and the vacancy the submarket actually runs. A property breaking even at 97.0% in a market that runs 8% vacancy is structurally short, regardless of how the pro forma reads.

Why is my break-even occupancy above 100%?›

Expenses plus debt service exceed gross potential rent, which means the property cannot cover itself even fully leased at market rent. The deal needs a lower price, less debt, higher rents, or lower operating costs before occupancy is the relevant question.

Does break-even occupancy include capital expenditures?›

Not under the standard definition, because it is built from operating expenses. Adding a capital reserve raises the break-even point and gives a more honest picture of what the building has to earn to sustain itself.

How does break-even occupancy relate to DSCR?›

They are two views of the same coverage question. As DSCR approaches 1.0, break-even occupancy approaches the point where all potential rent is consumed. This duplex sits at 0.97 and 97.0% at once.

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