Break-Even Occupancy Calculator
Calculate the minimum occupancy rate needed to cover all expenses for rental properties and multifamily buildings.
How it works
Break-Even Occupancy = (Operating Expenses + Debt Service) ÷ Gross Potential Rent × 100
Example
$40K expenses + $30K debt service = $70K ÷ $100K rent = 70% break-even occupancy.
FAQ
What is a good break-even occupancy rate?
Generally, 85% or lower is considered good, allowing for a 15% vacancy cushion. Higher break-even rates indicate tighter margins and greater risk.
Should I include vacancy allowance in expenses?
No, vacancy is already factored in by comparing to gross potential rent. Adding vacancy to expenses would double-count it.
What if my break-even occupancy is over 100%?
This means the property cannot break even even at 100% occupancy. You need to reduce expenses, increase rents, or reconsider the investment.
How often should I calculate break-even occupancy?
Recalculate when expenses change, rents increase, or you refinance. It's useful for annual budgeting and rent-setting decisions.
Does break-even occupancy include principal paydown?
Yes, it includes total debt service (principal + interest) since that's what you must pay monthly regardless of whether principal builds equity.