How break-even is calculated
Break-even months = Total cash invested ÷ Monthly net cash flow
Total cash invested = down payment + closing costs + initial repairs/rehab. Monthly net cash flow = rent minus all operating expenses minus mortgage P&I. Divide one by the other and you get the number of months until you've gotten your initial investment back, purely from rental income.
Worked example: you put $60,000 down on a $300,000 property + $8,000 closing + $5,000 initial repairs = $73,000 invested. Monthly cash flow $450. Break-even = $73,000 ÷ $450 = 162 months = 13.5 years.
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Frequently asked questions
What is the break-even point on a rental property?
Break-even on a rental property is the number of months it takes for the property's net cash flow to return your initial cash invested (down payment + closing costs + initial repairs). It measures pure cash-on-cash recovery — it excludes appreciation and equity build from mortgage paydown.
What's a good break-even period for a rental property?
There is no universal good period. Compare the modeled duration with your own liquidity needs, cash-flow targets, financing, evidence quality, and alternative uses of capital. The result assumes the entered monthly cash flow remains constant.
Does break-even include appreciation or equity?
No. Break-even isolates cash-on-cash recovery — how fast monthly cash flow alone returns your investment. Adding appreciation + principal paydown gives you total return (use IRR or 10-year projection for that). Break-even is a useful complement, not a replacement.
How is break-even different from cash-on-cash return?
Cash-on-cash is annualized (return ÷ cash invested, as a percentage). Break-even is duration (cash invested ÷ monthly cash flow, expressed in months). They measure the same dynamic from different angles. 12% cash-on-cash ≈ 100-month (8.3-year) break-even.
If my cash flow is negative, what does break-even mean?
With zero or negative monthly cash flow, there is no cash-flow recovery period under the entered assumptions. Appreciation, principal paydown, future rent changes, taxes, and sale proceeds are outside this calculation and should be modeled separately.