Break-even analysis

Break-even analysis identifies the point at which an investment's income exactly covers its costs — and how much conditions can move before it stops doing so.

The questions it answers

• What interest rate breaks this property? At what rate does cashflow turn negative or become unaffordable?
• What vacancy breaks it? How many weeks empty before you cannot cover costs?
• What rent does it need? The minimum weekly rent at which it stands up.
• What price break-even on sale? What you need to achieve to cover purchase price, costs, holding costs and selling costs.

Why it matters more than the base case

Most investors model the expected case. Break-even models the failure point. Knowing that a property survives to 8% interest but not 9% is far more useful than knowing it works at 5.8%.

Worked example

A property with $30,680 rent, $10,334 expenses and $335,300 of debt breaks even on cashflow at roughly 6.1% interest. At 5.8% it is marginally positive. That 0.3% is your entire buffer — worth knowing before you buy, not after.

Common misunderstanding

Sale break-even is higher than most people assume. Purchase costs plus commission, marketing and legal on exit mean a property typically needs several percent of growth just to get you back to even. That is the mathematical argument against short holds.

Related terms

Last reviewed: 1 August 2026 · General information only, not financial advice.

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