Break-Even Rent Calculator

Before agreeing a rent, it is worth knowing the figure below which the property costs you money every month. This works backwards from the mortgage and running costs to the rent that exactly covers them — including the vacancy allowance, which is what makes the honest break-even higher than most owners assume.

Knowing this number changes negotiations. It tells you when accepting a lower offer to fill a void is still rational, and when it simply locks in a loss for a year.

The formula

Rent must cover fixed costs after both vacancy and the management fee have taken their share. So rent = fixed costs ÷ ((1 − vacancy) × (1 − management)). Dividing rather than adding percentages is what most back-of-envelope estimates get wrong.

Worked example

A mortgage of 950 and 150 of maintenance and insurance gives fixed costs of 1,100. With an 8% vacancy allowance and a 10% management fee, the divisor is 0.92 × 0.90 = 0.828. Break-even rent is 1,100 ÷ 0.828 = about 1,329 a month — nearly 230 above the raw costs.

Using it in a negotiation

If a tenant offers below break-even, the question is whether the shortfall is smaller than another month empty. One empty month at this property costs the full 1,100 of fixed costs, so accepting 80 a month below break-even to fill it immediately is usually the better trade.

Frequently asked questions