Chartered Financial Analyst specializing in real estate investment and financial modeling.
Find out how many rental units you need occupied to cover your monthly costs. Enter any three variables—Total Monthly Fixed Costs, Rent per Unit, Variable Cost per Unit, or Number of Units—to solve for the fourth.
Rental Property Breakeven Calculator
Rental Property Breakeven Formula
The breakeven formula for a rental property finds the number of occupied units (Q) required for your total rental income to equal all fixed and variable operating costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Monthly Rent per Unit (P):
P = (F / Q) + V
Solve for Variable Cost per Unit (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your total costs that do not change with occupancy (e.g., mortgage P&I, property taxes, insurance, HOA dues).
- Monthly Rent per Unit (P): The average monthly rent you collect from a single occupied unit.
- Monthly Variable Cost per Unit (V): The costs incurred *only* for an occupied unit (e.g., utilities, property management fee as a % of rent, minor repairs).
- Breakeven Occupied Units (Q): The number of units you must have rented out to reach $0 in monthly cash flow.
Related Calculators
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What is a Rental Property Breakeven Point?
A **Rental Property Breakeven Point** is the number of occupied units (or the total rent amount) needed to cover all your monthly expenses. For a multi-family property, it tells you how many units must be filled to stop losing money. For a single-family home, it helps you determine the minimum rent you must charge.
**Fixed Costs (F)** are your “holding costs.” This is your mortgage payment (principal and interest), property taxes, and insurance (PITI), plus any condo or HOA fees. These costs are the same whether the property is 0% or 100% occupied. **Variable Costs (V)** are costs that scale with occupancy. The most common are property management fees (often 8-10% of collected rent) and utilities that you (the landlord) agree to pay.
The **Contribution Margin** (P – V) is the profit you make from one rented unit *before* paying the mortgage. This calculator finds how many units, each contributing this margin, are needed to pay for the total fixed costs of the building.
How to Calculate Rental Breakeven (Example)
Let’s calculate the breakeven point for a 4-unit multi-family property.
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Identify Monthly Fixed Costs (F):
The total monthly PITI (mortgage, tax, insurance) is $3,500.
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Identify Monthly Rent per Unit (P):
Each unit rents for $1,500.00.
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Identify Variable Cost per Unit (V):
The property manager charges 10% of rent, and water/sewer (paid by landlord) averages $50/unit.
($1500 * 10%) + $50 = $150 + $50 = $200.00 -
Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per unit: $1,500.00 (P) – $200.00 (V) = $1,300.00.
Next, divide the fixed costs by this margin:
Q = $3,500 / $1,300.00 ≈ 2.69 -
Conclusion:
The landlord must have 3 units (rounding up) rented to cover all costs. With 3 units rented, the property is cash-flow positive. With 2 units rented, the landlord is losing money each month.
Frequently Asked Questions (FAQ)
This is the same calculation, just expressed as a percentage. In the example above, 3 units are needed out of 4 total. The breakeven occupancy rate is (3 / 4) = 75%.
Yes. A simple way is to add a “vacancy” amount to your Variable Costs (V). If you expect a 5% vacancy rate, add ($1500 * 5%) = $75 to (V). This will (correctly) increase your breakeven point.
These are crucial. You should set aside a percentage of rent for these (e.g., 5% for maintenance, 5% for CapEx). You can add these to your (V). For example, (V) = $200 (PM/Util) + $75 (Maint) + $75 (CapEx) = $350. This gives you a more realistic breakeven number.
Work backward. If you own a 4-unit building (Q=4), know your Fixed (F) and Variable (V) costs, you can solve for (P). This tells you the *minimum rent* you must charge per unit to be profitable. `P = (F / Q) + V`.