Landlord Calculator

Break-Even Ratio Calculator

Find out what share of a property's gross income is already spoken for by operating expenses and the mortgage, before you even think about profit.

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What this calculator does

The break-even ratio adds up everything it costs to keep a property running, operating expenses plus debt service, and divides by gross income. A ratio under 100% means income covers all costs with room to spare; a ratio at or above 100% means the property loses money before you even count vacancy or unexpected repairs.

The formula

Break-Even Ratio = (Operating Expenses + Debt Service) ÷ Gross Operating Income

Lower is safer. Many investors look for a break-even ratio comfortably below 85-90% so there's cushion for vacancy, repairs, and rent dips.

Worked example

$24,000 income, $9,600 expenses, $160,000 loan at 6.5% / 30yr

Annual gross income	$24,000
Annual operating expenses	$9,600
Annual debt service	$12,135.71
Break-even ratio	90.57%

At 90.57%, this property has very little margin. A single month of unexpected repairs or a short vacancy stretch could push it underwater.

What is a good break-even ratio?

The break-even ratio shows what share of gross income is consumed by operating expenses plus debt service. Lenders often look for a break-even ratio of 85% or lower, meaning the property can lose up to 15% of its income before it stops covering its costs. Lower is safer.

Think of the gap between the ratio and 100% as your margin of safety. A break-even ratio of 80% means rents could fall, or vacancy could rise, by 20% before you would have to feed the property out of pocket.

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Frequently asked questions

How is the break-even ratio calculated?

Add annual operating expenses and annual debt service, then divide by gross operating income. The result is the percentage of income needed just to cover costs. A ratio of 85% means 85% of income is spoken for and 15% is your cushion.

What break-even ratio do lenders prefer?

Many lenders like to see a break-even ratio of 85% or lower on rental loans, since it shows the property can absorb a meaningful drop in income before it fails to cover expenses and debt. A lower ratio signals a safer, more resilient deal.

What is the difference between break-even ratio and DSCR?

Both measure safety margin but from different angles. DSCR compares net operating income to debt service as a multiple. The break-even ratio expresses costs as a percentage of gross income. They are complementary: DSCR focuses on the loan, break-even on the whole cost stack.

Why does the break-even ratio matter?

It tells you how much income you can lose before the property stops paying for itself. A high ratio means little room for vacancy or rising costs; a low one means more resilience. It is one of the clearest gauges of how risky a leveraged rental is.