What Rent Do You Need to Break Even on a Rental? (2026 Calculator Example)
A $500,000 rental with 20% down at 5.5% needs $3,450 a month in rent to break even after tax, insurance, maintenance and a 4% vacancy allowance.
Break-even rent is the monthly rent at which the property covers its mortgage payment, property tax, insurance, maintenance and an allowance for vacancy, with nothing left over. For a $500,000 property with 20% down at 5.5% over 25 years, that is about $3,450 a month. If market rent is $2,600, the property loses roughly $800 a month; if it is $3,700, it clears $250. Run this number before you look at the listing's "estimated rental income."
Figures come from the CostToClose break-even rent calculator.
The formula
Break-even rent = (annual mortgage payments + property tax + insurance + maintenance + management) ÷ 12 ÷ (1 − vacancy rate).
The vacancy adjustment matters: a 4% allowance means the rent you charge must be 4% higher than the bare costs to cover the month every two years the unit sits empty.
Worked example from the calculator
| Item | Annual | Monthly |
|---|---|---|
| Mortgage payment ($400,000 at 5.5%, 25 years) | $29,299 | $2,442 |
| Property tax | $4,200 | $350 |
| Insurance | $1,200 | $100 |
| Maintenance (1% of value) | $5,000 | $417 |
| Subtotal | $39,699 | $3,308 |
| ÷ (1 − 4% vacancy) | $3,446 |
Figures computed using the CostToClose calculator, 14 September 2026. Add property management at 8% of rent if you will not self-manage: break-even rises to about $3,760. Reproduce this.
Break-even rent at different financing
| Down payment | Rate | Break-even rent |
|---|---|---|
| 20% | 5.5% | $3,446 |
| 20% | 4.5% | $3,209 |
| 35% | 5.5% | $2,969 |
| 50% | 5.5% | $2,492 |
| 100% (no mortgage) | — | $903 |
Every 0.5% of rate on a $400,000 mortgage is about $115 a month of rent.
Why break-even is not the whole picture
Break-even treats the mortgage payment as a cost. About $600 of the $2,442 payment in year one is principal, money that stays yours. A property renting $600 below break-even is losing cash but not losing value; a property renting $600 above it is building equity and paying you. Whether the equity is worth the monthly cash is the appreciation question covered in Is a rental property worth it?.
What break-even is good for: a fast, honest screen. If the seller's pro forma says $2,600 and your break-even says $3,450, the pro forma is asking you to fund $850 a month for the privilege of owning.
What changes the number
- Rate and down payment, as in the table.
- Maintenance assumption. 1% of value is a common default; older houses run 2%, new condos less but with fees.
- Condo fees go straight into the subtotal: $450 a month raises break-even by about $470.
- Property tax varies fourfold by city; use the property tax rates guide.
- Vacancy. CMHC's national rate is under 2%, but a single vacant month a year is 8%; be conservative.
Frequently asked questions
How much rent do I need to cover a mortgage?
More than the payment. Add property tax, insurance, maintenance and a vacancy allowance. On a $400,000 mortgage at 5.5%, the payment is $2,442 but break-even rent is about $3,450.
What is a good rent-to-price ratio in Canada?
Break-even at 20% down and current rates works out to roughly 0.65% to 0.7% of the price per month. Most large Canadian cities sit at 0.4% to 0.55%, which is why cash flow is negative for typical purchases.
Should I include principal paydown when calculating break-even?
Not for cash break-even. It is real return, but it is equity, not cash; count it separately when judging total return.
How do I estimate maintenance for a rental?
1% of the property value per year is a standard default; more for older properties, less for new condos (whose fees cover the exterior).
Does break-even include property management?
Only if you add it. Budget 8% to 10% of rent if you will hire a manager, which raises break-even by roughly $300 a month on this example.
Sources
- CMHC, Rental Market Report — vacancy rates — checked 14 Sept 2026
- Canada Revenue Agency, Rental income guide T4036 — checked 14 Sept 2026
- CostToClose break-even engine (semi-annual compounding) — 14 Sept 2026
This is general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown. It does not constitute legal, tax, or mortgage advice. Because rules and rates change, confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before you rely on them.