Break-even ratio measures how much of a property's potential income you must collect just to cover all its bills. The common form adds operating expenses and annual debt service, then divides by gross potential income. A property needing $40,000 to cover expenses and loan payments against $50,000 of potential rent has an 80% break-even ratio, meaning you can lose up to 20% to vacancy or non-payment before it stops paying for itself.
Lenders watch this ratio because it shows how much cushion stands between a property and a monthly shortfall. A break-even ratio near 100% is fragile, since one vacancy tips it into the red. It is closely related to debt service coverage: both ask whether the income reliably covers the loan, just framed from opposite directions.
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Written and maintained by the Aptoria editorial team
Editorial method reviewed July 28, 2026. Aptoria reviews scope, source fit, examples, limitations, links, and publication gates. This record does not claim attorney, CPA, lender, appraiser, or other independent professional sign-off.
Related terms
Investing metrics
Debt yield
Debt yield is annual net operating income divided by the loan amount or outstanding loan balance, expressed as a percentage.
Investing metrics
Operating expense ratio (OER)
A property's operating expenses as a percentage of the income it brings in, a quick read on how efficiently it runs.
Investing metrics
Cash flow
The cash left over each period after all income is collected and all expenses — including the mortgage — are paid.
Investing metrics
Debt-service coverage ratio (DSCR)
Debt-service coverage ratio divides net operating income by the annual debt service required during the same period.
Investing metrics
Vacancy rate
The share of rental units — or potential rent — that sits empty and uncollected over a period.
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