Rental Break-even and Cushion Calculator

The model is a steady-state monthly-equivalent scenario. Every month in it is the same month: an annual amount is divided by twelve and spread evenly, and vacancy is averaged across a 52-week model year rather than placed in it. Real bills arrive when they arrive and real vacancies happen when they happen; this model has no calendar, and that is a simplification you should know about rather than one to discover later.

Scheduled rent, and the rent actually collected

The rent you enter is the contracted amount while the property is occupied. Vacancy comes off it before anything else, and the result is what the scenario expects to collect:

occupancy            o = 1 - v
vacancy allowance    V = R * v
collected rent       E = R * o   (equivalently, E = R - V)

A vacancy entered in weeks becomes a rate by dividing by exactly 52. That is a model year, not a calendar one, and no daily proration is performed anywhere.

The management fee is charged on what is collected

A percentage management fee applies to rent actually collected in this model, so it falls when vacancy rises. Charging it on scheduled rent instead would overstate it in exactly the scenarios where the rest of the result is already under pressure:

management fee       G = E * m

A fixed management or administration charge is a different thing and belongs in the owner-cost entry, where it stays fixed whatever the occupancy does.

Two cash-flow lines, and why both are shown

Cash flow before reserves is the ordinary monthly picture: what comes in, less the fee, the owner costs and the debt service. Cash flow after reserves takes off the maintenance and capital-expenditure allowances you set. Both are published, because a scenario can look comfortable on the first line and be short on the second — and the reserves are the whole of the difference:

fixed obligations    Q  = D + O + M + C
before reserves      CF_pre = E - G - D - O
after reserves       CF     = CF_pre - M - C
equivalently         CF     = E * (1 - m) - Q

The percentage fee is deliberately outside Q. Everything in Q stays fixed while occupancy moves, and the fee does not — which is exactly why the two break-even solutions below can be solved in closed form at all.

Full debt service is included because it affects monthly cash flow. Principal repayment may build equity, so this is not accounting profit or total investment return.

Reserves are planning allowances, not bills. The model does not carry them as a balance, does not compound them, does not link them to any assessment of the building, and does not spend them. It also does not judge them: UBWHY publishes no recommended reserve percentage, vacancy allowance or debt-service ratio. Nothing on this page is prefilled with one, and the tool does not judge the figures you enter.

The two break-even thresholds

Both invert the same equation, one through rent and one through occupancy. Each holds everything else exactly as entered:

break-even rent        R_BE = Q / [o * (1 - m)]
break-even occupancy   o_BE = Q / [R * (1 - m)]

A break-even occupancy above 100% is not a high requirement. It means the scheduled rent entered does not cover the obligations entered even with no vacancy at all, and the page says so rather than clipping the figure to 100%. At 100% vacancy nothing is collected whatever the rent is, so there is no finite break-even rent to print and the tool prints words instead of a very large number.

Three vacancy figures, and only one of them is headroom

This is the distinction the tool exists for, and it is the one most easily lost in a single number:

break-even vacancy     v_BE  = 1 - o_BE          (only where 0 <= o_BE <= 1)
total capacity         W_BE  = v_BE * 52
already assumed        W_base = v * 52
cushion                W_add = W_BE - W_base     (only where CF >= 0)
past the threshold     W_over = W_base - W_BE    (only where CF < 0)

The total is not the cushion. A scenario that can absorb 7.25 vacant weeks a year and already assumes 2.60 of them has 4.65 weeks of headroom, not 7.25. Where the scenario is already short, the last line is shown instead — as a distance past the threshold, never as a negative cushion.

The rent cushion, in whichever direction it runs

rent could fall by     H_R = (R - R_BE) / R      (only where CF >= 0)
rent would need        I_R = (R_BE - R) / R      (only where CF < 0)

Both are distances to a threshold at unchanged occupancy and costs. Neither says the rent could be charged, that a change would be lawful where you are, or that a market would pay it.

Full occupancy, as a test rather than an expectation

at full occupancy      CF_full = R * (1 - m) - Q

This one answers a single question: can reducing vacancy alone close the gap? Where it is negative the answer is no, whatever happens to occupancy. It is a mathematical reference and not a claim that full occupancy is attainable.

The stress case, if you enter one

stressed rent          R_s  = R * (1 - s_r)
stressed collected     E_s  = R_s * (1 - v_s)
stressed cash flow     CF_s = E_s * (1 - m) - (Q + X_s)

Only three things change: the scheduled rent, the total vacancy and one added owner cost. The management percentage, the debt service, the base owner costs and both reserves are held exactly as entered, so the comparison isolates what you chose to change rather than silently repricing the financing. The tool generates no mild, moderate or severe case of its own, and attaches no probability to the one you enter.

What this does not calculate

This is a steady-state debt-service cash-flow scenario based on the rent, vacancy, costs and reserves entered. It does not include tax, property-value change, mortgage amortisation, equity build-up, or the timing of repairs and vacancies.

• Purchase price, gross or net rental yield, cap rate, cash-on-cash return, IRR or total return. This is a cash-flow and cushion tool, and it excludes price and yield by design.
• Tax of any kind, in any jurisdiction. No deduction, no depreciation, no allowance, no income tax and no capital-gains treatment. Every figure here is before tax and stays that way.
• Mortgage amortisation, the split between interest and principal, the outstanding balance, equity build-up, loan-to-value, refinancing or a lender's coverage requirement.
• Property-value change, appreciation, depreciation of the building, resale value, closing costs, transfer taxes, broker fees or renovation.
• Inflation, rent growth or cost growth. Every month in this model is the same month, and nothing in it moves over time.
• Whether a rent is legally achievable, whether an increase is lawful, whether a cost is recoverable from a tenant where you are, or whether a lender would approve anything.
• Arrears, tenant default, eviction cost, deposit accounting, short-term-rental seasonality, nightly pricing, multi-unit turnover or unit-level occupancy.
• Whether a reserve is adequate, whether a vacancy assumption is realistic, or whether the property is worth what you paid. The tool judges none of the figures you enter.

Reaching break-even in this model does not make a property a good investment, and missing it does not make it a bad one. Purchase price, property-value change, tax, equity build-up, condition, location, regulation and what else the money could have done are all outside this calculation.

Why an attractive gross yield can sit on top of weak or negative monthly cash flow, and why the layers between the two are where the answer actually lives: Why Gross Rental Yield Is Not Cash Flow.