Break-Even Ratio

Break-Even Ratio – an essential ratio that lenders and investors look at is the break-even ratio. It tells you – at what occupancy rate the deal breaks even. If the break-even ratio is 90% or higher, an investor or lender will be wary because of the high occupancy level required. It’s quite common for occupancy levels to drop below 90%, depending on property location and market cycles.

Break-Even Ratio = (Expenses + Debt Service – Reserves) / Gross Income

« Back to Glossary Index