How to Interpret Your Break-Even Results

The Break-Even Analysis Tool evaluates how much income a property must generate to cover its operating expenses and debt obligations. Rather than estimating returns, it focuses on operational resilience—how much room the property has to absorb income disruptions.

Break-Even Gross Income

This figure represents the minimum annual income required to cover:

• Operating expenses

• Debt service

If actual income falls below this level, the property will operate at a loss. This threshold helps identify how sensitive a deal is to changes in rent, vacancy, or expenses.

Break-Even Occupancy Rate

The break-even occupancy rate shows the percentage of potential income the property must achieve to avoid losses.

A lower break-even occupancy generally indicates a more resilient property, while a higher break-even occupancy suggests greater exposure to vacancy risk or aggressive financing.

This metric is especially useful when comparing properties across different markets or operating profiles.

Income Cushion

The income cushion measures the difference between your expected effective income (after vacancy) and the break-even income level.

• A larger income cushion indicates greater tolerance for rent declines, higher vacancy, or unexpected expenses.

• A smaller or negative income cushion suggests the property operates close to its break-even point and may be more vulnerable to market or operational disruptions.

The income cushion is not a return metric. Instead, it provides a practical margin-of-safety indicator that complements cash flow and return-based analysis.

Using Break-Even Analysis in Context

Break-even results should be interpreted alongside other performance metrics, not in isolation. A property with strong projected returns but a thin income cushion may carry higher operational risk, while a lower-return property with a wide income cushion may offer greater stability.

Used together with Cash Flow, Deal Comparison, and IRR analysis, the Break-Even Tool helps ensure investment decisions are grounded in both upside potential and downside protection.