Chartered Financial Analyst specializing in real estate investment and property finance.
Find out how many units you need to rent to be profitable. Enter any three variables—Monthly Fixed Costs, Avg. Rent per Unit, Avg. Cost per Unit, or Breakeven Units—to solve for the fourth.
Real Estate Breakeven Calculator
Real Estate Breakeven Formula
The breakeven formula for real estate finds the number of rental units (Q) you must occupy for your rent to cover all fixed and variable property costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Avg. Rent per Unit (P):
P = (F / Q) + V
Solve for Avg. Cost per Unit (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your total, recurring monthly overhead. For real estate, this is primarily your **PITI** (Principal, Interest, Taxes, and Insurance), plus any HOA fees or utilities you pay.
- Avg. Rent per Unit (P): The average monthly rent you collect from a single occupied unit.
- Avg. Cost per Unit (V): The average monthly cost *per occupied unit* (e.g., property management fees, average repairs, turnover costs).
- Breakeven Units (Q): The total number of units you need to have rented out each month to reach $0 in profit (or cash flow).
Related Calculators
- Rental Property Breakeven Calculator
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- Property Management Fee Calculator
What is a Real Estate Breakeven Point?
In rental real estate, the **Breakeven Point** (also known as the breakeven occupancy) is the number of rented units (Q) or the percentage of occupancy needed to cover all the property’s costs. It’s the point where your cash flow is $0; you aren’t losing money, but you aren’t making any, either.
**Fixed Costs (F)** are your largest and most consistent expenses. This is almost always your PITI (Principal, Interest, Taxes, Insurance) payment. It also includes any fixed costs that don’t change with occupancy, like landscaping, trash service, or HOA dues.
**Variable Costs (V)** are the costs that scale with occupancy. The most common is a **property management fee**, which is often a percentage of the rent (P). Other (V) costs include tenant-specific repairs, turnover costs (cleaning/painting) amortized monthly, and any utilities you pay per-unit.
The **Contribution Margin** (P – V) is the profit from a single rental unit that goes toward paying your fixed PITI. If you rent a unit for $1,500 (P) and your variable costs are $200 (V), your contribution margin is $1,300. This calculator finds how many $1,300 “profit chunks” you need to cover your total fixed costs.
How to Calculate Real Estate Breakeven (Example)
Let’s calculate the breakeven point for a 10-unit apartment building.
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Identify Monthly Fixed Costs (F):
Your total monthly mortgage (P&I) is $6,000. Property taxes are $1,200/mo, and insurance is $800/mo. Your (F) is $8,000.
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Identify Avg. Rent per Unit (P):
Each unit rents for the same price: $1,400.
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Identify Avg. Cost per Unit (V):
You pay a 10% property management fee (`$1,400 * 0.10 = $140`). You also budget $100/mo per unit for repairs and maintenance. Your (V) is $240.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per unit: $1,400 (P) – $240 (V) = $1,160.
Next, divide the fixed costs by this margin:
Q = $8,000 / $1,160 = 6.89 -
Conclusion:
You must have 7 units rented out (rounding up) just to cover your costs. The rent from units 8, 9, and 10 is your profit.
Frequently Asked Questions (FAQ)
This calculator *finds* your breakeven vacancy. In the example above, you need 7 units rented, meaning your breakeven occupancy is 70% (7/10). This also means you can tolerate a 30% vacancy rate (3 units) before you start losing money each month.
Yes. For a breakeven *cash flow* analysis, you must include the entire PITI payment as your fixed cost (F), as this is the cash you are required to pay out each month.
If your property manager charges a flat fee (e.g., $500/mo) regardless of occupancy, it’s a **Fixed Cost (F)**. If they charge a percentage of collected rent (e.g., 8%), it is a **Variable Cost (V)**.
Enter your (F) (e.g., $8,000), (V) (e.g., $240), and your total number of units (Q) (e.g., 10). Solve for (P): `P = ($8,000 / 10) + $240 = $800 + $240 = $1,040`. You must charge at least $1,040 per unit *at 100% occupancy* just to break even.