Break-Even Rent: The First Number to Check on Any Rental Deal

Break-even rent is the monthly rent at which a rental property covers every one of its costs (mortgage, taxes, insurance, HOA, vacancy, maintenance, and management) and earns exactly nothing. It’s the most underrated screening metric in rental investing, because it converts a complicated deal into a single question: is market rent above this line, and by how much?

The formula

Break-even rent = principal & interest + taxes + insurance + HOA + vacancy allowance + maintenance reserve + management fee (all monthly). Because vacancy, maintenance, and management are usually percentages of rent, the exact figure is solved iteratively, or you approximate by dividing fixed costs by (1 − those percentages). A calculator does this instantly.

A worked example

Take a real listing: $149,900 purchase price, 20% down at 7% on a 30-year note, $2,350/yr taxes, no HOA. Principal and interest run about $798/mo, taxes $196/mo, insurance roughly $69/mo. Add vacancy at 5%, maintenance at 8%, and management at 9% of rent, and the break-even rent lands near $1,362/mo. Local comps put market rent at $1,750, so the deal clears break-even by $388, or about 28.5%. That margin, not the asking price, is what makes it worth a closer look.

Try it: drag the assumptions and watch the line move.

Margin above break-even is your safety buffer

Everything that goes wrong in a rental (a soft rental market, a surprise repair, a longer vacancy) shows up as pressure on that margin. Useful screening thresholds:

• Under 5% above break-even: pass. One bad month erases the year.
• 5–15%: workable only if you have a value-add plan (raise rent, cut a cost, refinance later).
• 15%+ : a genuine cash-flow candidate; go verify the rent and costs.

Break-even rent vs. the 1% rule

The 1% rule (monthly rent ≥ 1% of purchase price) was a fine shortcut when rates were 3%. It knows nothing about your actual taxes, insurance, HOA, or interest rate: the things that decide whether a specific deal works. Break-even rent uses all of them, which is why two houses at the same price and rent can sit on opposite sides of the line.

Checking it without a spreadsheet

CashFlowPanel computes break-even rent on any Zillow or Redfin listing in one click: it reads price, taxes, and HOA off the page, applies your financing assumptions, and shows a gauge of where the comp-based rent estimate sits relative to break-even. For the rest of the screening workflow, see how to analyze a rental property on Zillow.