Faro Labs / Tools / Break-even occupancy calculator
Break-even occupancy calculator
How much of the year does this rental need to be occupied just to cover its costs? The answer is the deal's margin of safety. The vacancy it can survive before it starts losing money.
93% occupancy just to break even leaves almost no cushion. A single extra vacant month can turn the year negative.
How break-even occupancy works
max vacancy = 100% − break-even occupancy
Every rental has costs that don't care whether it's occupied: the mortgage, taxes, insurance, HOA. Break-even occupancy asks the blunt question: what fraction of the year must a tenant be paying just to cover those? A property that breaks even at 75% has enormous cushion; one that breaks even at 96% is one bad tenant away from a losing year.
Why it's the honest stress test
Cash flow at full occupancy always looks fine. Break-even occupancy shows you the downside. How much has to go right for the deal to work. Deals that only pencil at 95%+ occupancy are fragile: turnover, a slow leasing season, or a soft rental market can quietly turn them negative. This is the number that separates a comfortable hold from a nail-biter.
Break-even questions
What is break-even occupancy?
The percentage of the year a rental must be occupied just to cover all its expenses and debt service. Below it, the property loses money; above it, it profits. It's a direct measure of how much vacancy cushion a deal has before it turns negative.
What is a safe break-even occupancy?
Lower is safer. Under about 85 percent gives real cushion against turnover and soft demand. Above 90 percent is fragile. A single extra vacant month can push the year into a loss. Above 100 percent means the property never breaks even at market rent, which is a signal to walk or renegotiate.
How is it different from vacancy rate?
Vacancy rate is an assumption you feed into an analysis. Break-even occupancy is an output that tells you the maximum vacancy the deal can survive. If break-even occupancy is 88 percent, the property can tolerate up to 12 percent vacancy before losing money, so a 5 percent vacancy assumption leaves a comfortable margin.
Every calculator
Stress-test the whole deal.
Faro shows break-even alongside cash flow, DSCR, and the price where every rule still passes: from a pasted listing.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.