January 8, 2025•2 min read
Break-Even Ratio (BER): Will Your Rental Survive a Downturn?
RentalIntel Team
Real Estate Investment Experts
Every investor asks: "How much vacancy can I afford?"
The Break-Even Ratio (BER) helps answer that question.
The Formula
Where:
- Operating Expenses = Property taxes, insurance, maintenance, etc.
- Debt Service = Mortgage payments
- Gross Rental Income = Total rent collected
Real-Life Example
Rental Property Breakdown
| Category | Amount (Annual) |
|---|---|
| Gross Rental Income | $48,000 |
| Operating Expenses | -$12,000 |
| Mortgage Payments | -$24,000 |
BER Calculation
What Does a 75% BER Mean?
- If vacancy rises above 25%, you lose money.
- A lower BER means more cushion against vacancies.
- Lenders prefer BER below 85% for loan approval.
When BER Matters (and When It Doesn’t)
✅ Essential for rental risk assessment
✅ Used by lenders to approve loans
❌ Doesn’t consider appreciation or tax benefits
❌ Not as useful for short-term rentals (use RevPAR instead)
Pro Tips
- BER below 80% is ideal for stable cash flow.
- If BER is too high, consider reducing debt or raising rent.
- Pair BER with DSCR to ensure financial stability.
The Bottom Line
A low BER = safer investment.
If your break-even ratio is too high, a few months of vacancy could wipe out your profits.
What’s the average BER in your market? Let’s discuss!
