Break-Even Rent

Before you list a rental, learn the number the rent must beat. Break-even rent is the monthly rent covering every carrying cost — mortgage, tax, insurance, condo fees, maintenance, and the months nobody pays you. Charge less and you are subsidizing your tenant. This calculator finds that floor so you can decide whether the market rent clears it.

What this calculator answers

It computes the minimum monthly rent for the property to cover all its costs — the point where cash flow is exactly zero. It answers the landlord's most practical question: what must I charge just to stop the bleeding?

What it deliberately does not cover

Break-even is zero profit by definition — it does not add any return on your investment, so treat its answer as the floor, not the target. It does not include income tax on the rental income; your true after-tax break-even is higher. It does not credit the principal portion of the mortgage payment building your equity — for break-even purposes that principal is cash out the door, even though it is forced savings. It does not model appreciation, and it cannot tell you whether tenants will pay the number.

Every input, explained

Mortgage payment. Enter the full monthly principal-and-interest payment you will actually make. The common error is entering the payment from a 30-year amortization illustration when your commitment letter says 25 years — use the commitment letter, not the marketing version.

Property tax (monthly). Enter one-twelfth of the annual bill. The common error is a factor-of-twelve mistake: typing the annual figure into a monthly field.

Insurance (monthly). Enter one-twelfth of the annual landlord policy premium. The common error is using a homeowner's policy figure, which understates the correct product.

Condo or HOA fees. Enter the full monthly fee. The common error is entering half — lenders halve condo fees for debt-service ratios, but the property manager collects all of it.

Maintenance reserve. Enter a monthly figure, often derived as a percentage of rent. This input is slightly circular — a percentage of rent depends on the rent being solved for — so the calculator iterates to a consistent answer. The common error is skipping it entirely.

Vacancy allowance. Enter the percentage of the year you expect the unit to sit empty or rent to go uncollected. The common error is zero, justified by "the market is hot" — hot markets still have turnover, and turnover months are rarely fully paid.

Target monthly profit (optional). Enter any amount above zero you want beyond covering costs. The common error is treating the break-even output as the listing price; add your margin deliberately.

How the math works

Add up all the fixed monthly costs — everything except vacancy. Then divide by one minus the vacancy rate: with a 5% allowance, divide by 0.95. The logic: you collect rent only 95% of the time, so the rent in paying months must cover 100% of the costs. Add any target profit on top. That is the break-even rent.

Worked example: Ottawa condo at $480,000

An investor buys an Ottawa condo for $480,000 as a rental. Rentals require 20% down minimum, so the down payment is $480,000 × 20% = $96,000 and the mortgage is $384,000. Monthly cost inputs are example figures:

1. Mortgage payment (principal and interest): $2,150.
2. Property tax: $280 per month.
3. Landlord insurance: $60 per month.
4. Condo fees (full amount): $350 per month.
5. Maintenance reserve: $150 per month.
6. Fixed monthly costs: $2,150 + $280 + $60 + $350 + $150 = $2,990.
7. Vacancy allowance of 5%: break-even rent = $2,990 ÷ (1 − 0.05) = $2,990 ÷ 0.95 = $3,147.37, roughly $3,147 per month.

Check it backwards: $3,147 × 12 = $37,764 in rent; $2,990 × 12 = $35,880 in costs; 5% vacancy on $37,764 = $1,888. Costs plus vacancy: $37,768 — matching rent to within rounding.

If comparable units lease at $2,700, this property cannot break even at market rent — the investor needs a larger down payment, a lower price, or the discipline to walk away.

Provincial quirks and edge cases

The 20%-down minimum on rentals raises the break-even bar everywhere compared with house-hacking a principal residence at 5% down — less leverage means a bigger mortgage payment relative to price. In Quebec, the buyer's "welcome tax" is billed by the municipality two to three months after closing rather than collected at the notary; it does not change the monthly break-even, but it changes day-one cash needs. The sharpest provincial edge is rent regulation: if your break-even exceeds what the unit currently achieves, some provinces limit how fast you can close that gap [VERIFY your province's tenancy rules] — underwrite at the rent you can actually charge. And in Toronto, a unit sitting empty between tenants can attract the 3% vacant home tax on assessed value if occupancy is not declared, turning a vacancy allowance into a real tax line.

Questions to ask a professional

1. Realtor: Will this unit actually lease at my break-even number — what are comparable units renting for right now?
2. Condo manager or board: Are any special assessments or fee increases coming that would raise my fixed costs?
3. Mortgage broker: At 20% down with no insurance option, what is my real monthly payment — and how sensitive is my break-even to a rate change at renewal?
4. Tax professional: After income tax on the rental income, what is my true after-tax break-even?