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 $1,439/mo. Local comps put market rent at $1,750 — so the deal clears break-even by $311, or about 22%. That margin, not the asking price, is what makes it worth a closer look.

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.