Break-Even Occupancy Calculator

The occupancy level at which a property's income exactly covers its operating expenses, debt service and reserves. Above it the building pays for itself; below it somebody is funding the shortfall. It converts a pile of annual figures into one number in the unit that vacancy actually arrives in — points of occupancy.

Add up what the building has to pay each year — operating expenses, annual debt service and reserves — and divide that by the gross potential rent, the income the property would produce at full occupancy. Express the result as a percentage. A building needing $460,754 a year against a gross potential rent of $516,304 breaks even at 89.24% occupancy.

Lower is safer, and the number on its own means less than the gap between it and where you actually are. A 75% break-even in a building running at 78% is more fragile than an 85% break-even in one running at 97%. What matters is the cushion, and whether any single lease expiry is larger than it.

Yes, if you have committed to funding them. Reserves sit below the NOI line, which is exactly why quick break-even math tends to drop them — and dropping them makes the answer look better than it is. On the example on this page, leaving reserves out moves the break-even from 89.24% to 86.34%: nearly three points of occupancy of false comfort, on a building whose real cushion is under three points.

By grossing up the rent actually being collected, at the occupancy actually achieved — if a building collects $475,000 at 92% occupancy, its gross potential rent is $516,304. That is deliberate. It answers what this mix of suites earns at full occupancy, at the rents those tenants actually signed. Summing market rent across every unit would produce a different, larger number and would answer a question about a building nobody has leased yet.

They are the same question asked in different units. DSCR asks how far income can fall before it stops covering debt, as a ratio. Break-even occupancy asks the same thing in points of occupancy, and it includes operating expenses and reserves rather than debt service alone. The advantage is practical: vacancy does not arrive as a ratio, it arrives as a tenant leaving, and points of occupancy is the unit you can check a rent roll against.

Because gross potential rent is grossed up from the rent you are collecting. The same $475,000 coming in at 85% instead of 92% implies higher rents per occupied foot, which is a stronger building — so the break-even falls. Occupancy on its own only scales the cushion; it never changes whether there is one. To model losing a tenant, drop the in-place rent by what that tenant paid and the occupancy by the space it held, and move both together.

One worth about as much rent as the cushion is worth occupancy. On the example, $475,000 across 92 points is $5,163 of rent per point, and the cushion is 2.76 points — so a suite paying roughly $14,250 a year takes the building to exactly break-even, and one twice that size puts it 2.76 points under. The break-even rate itself does not move, because the tenant leaves both sides of the fraction.

The expiration schedule. A cushion of three points is comfortable in a building where the largest suite is two points of the total, and dangerous where one tenant is fifteen. The useful exercise is to take the biggest expiries in the next twenty-four months and check each one against the cushion — if any single lease is larger than the gap, that lease is the deal.