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Break-Even Expense Ratio Calculator
Break-even expense ratio adds operating expenses, debt service, and reserves together and divides by effective gross income. Above 100% and the property is losing money. The calculator also returns OER (opex only) and the break-even occupancy — how low occupancy can fall before cash flow goes negative.
Break-even expense ratio
85.4%
Operating expense ratio (OER)
43.8%
Break-even occupancy required
80.2%
Annual cash cushion above break-even
$140,000
How the math works
Break-even expense ratio = (opex + debt service + reserves) ÷ EGI. It tells you the total cost structure as a percentage of income — how close the property is to losing money. The gap between this and 100% is your operating cushion.
OER excludes debt and is used to compare operating efficiency across assets. Break-even ratio includes debt and is the real lender stress test — if it crosses 100% the property cannot service its own obligations.
How to Use
- Enter effective gross income.
- Enter operating expenses (property tax, insurance, utilities, management, maintenance).
- Enter annual debt service (P&I).
- Enter reserves / recurring capex.
- Read break-even expense ratio, OER, and required occupancy.
Frequently Asked Questions
Typical break-even ratios?
Stabilized multifamily: 75-85%. Office with triple-net leases: 60-70%. Hotels can be 85-95% due to operating intensity. Anything over 95% is very fragile and has no room for a bad year.
Should reserves be in break-even?
Yes for underwriting. Ignoring reserves produces a break-even ratio that misses the capex wall 5-10 years in. Include reserves any time you need a defensible number for a lender or investor.
How is break-even occupancy derived?
(opex + debt service) ÷ EGI gives the share of EGI needed just to cover operating and debt costs. If it's 82%, occupancy cannot drop below 82% of current without turning cash flow negative.
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