Short answer: It is the lowest monthly rent at which cash flow is exactly $0 after the mortgage and operating costs. FirstDoor calculates it as (P&I + tax/12 + insurance/12 + HOA) ÷ (1 − vacancy% − maintenance% − management%). On a $200,000 example at 7.40% with 20% down and 5+5+8 defaults, break-even is about $1,717/mo.
Definition
Break-even rent is the lowest monthly rent at which a rental's cash flow is exactly $0. It equals fixed monthly costs (principal and interest, taxes, insurance, HOA) divided by the share of rent left after vacancy, maintenance and management.
By the numbers: With FirstDoor's defaults (5% + 5% + 8%), you divide by 0.82. At 7.40% with 20% down (Freddie Mac, October 15, 2026), a $200,000 home with $2,400/yr tax and $1,200/yr insurance needs about $1,717/mo to break even.
What break-even rent means
Break-even rent is the lowest monthly rent at which cash flow is exactly $0. At that rent, the property covers principal and interest, property taxes, insurance, HOA, and your budgeted vacancy, maintenance and management — with nothing left over.
It answers a different question from "what will it rent for?" Asking rent is what the market might pay. Break-even rent is what you need. The gap between them is your cushion: how far rent can fall, or how wrong your estimate can be, before you pay out of pocket every month.
Good to know: Break-even is a cash-flow floor, not a target. A deal that only clears by $50/mo has almost no room for a longer vacancy, a rate surprise or a repair month.
The formula FirstDoor uses
Fixed monthly costs do not shrink when rent falls: principal and interest, monthly taxes, monthly insurance and HOA. Vacancy, maintenance and management do scale with rent, so only a fraction of each rent dollar is left to cover the fixed costs. FirstDoor's break-even rent is:
Break-even rent = (P&I + tax/12 + insurance/12 + HOA) ÷ (1 − vacancy% − maint% − mgmt%)With FirstDoor's defaults of 5% vacancy + 5% maintenance + 8% management, the divisor is 0.82. On the worked example below, fixed costs are about $1,408/mo, so break-even rent is about $1,717/mo.
Tip: Run any listing in the free break-even rent calculator, or open the full deal score pre-filled with the example.
Why it differs from the 1% rule
The 1% rule only compares rent with price: a $200,000 home "passes" at $2,000/mo. It ignores your loan, taxes, insurance and expense budget.
Break-even rent uses those real costs. On the same $200,000 example at 7.40% with 20% down, the 1% rule and the asking rent both sit at $2,000/mo, but break-even is about $1,717/mo — so the deal clears, with about $283/mo of cushion. Change the rate, the down payment or the expense percentages and break-even moves; the 1% rule does not notice.
Red flag: Treating a 1% pass as proof the deal cash-flows. High taxes, a higher rate or optimistic 0% expense assumptions can leave you below break-even even when rent ÷ price looks fine.
Worked example: how inputs move break-even
Same $200,000 house at $2,000/mo asking rent, $2,400/yr tax, $1,200/yr insurance. Base case: 20% down at 7.40% (Freddie Mac average, October 15, 2026), FirstDoor defaults (5% vacancy, 5% maintenance, 8% management). Break-even is about $1,717/mo — a cushion of about $283/mo vs asking rent, and cash flow of about $232/mo.
| Scenario | Break-even rent | Cushion vs $2,000 | Cash flow |
|---|---|---|---|
| Base: 20% down, 7.40%, 5+5+8 | $1,717 | $283 | $232 |
| Rate 6.40% (−1 pp) | $1,586 | $414 | $339 |
| Rate 8.40% (+1 pp) | $1,852 | $148 | $121 |
| 25% down | $1,632 | $368 | $301 |
| 15% down | $1,801 | $199 | $163 |
| Vac+maint+mgmt = 10% | $1,564 | $436 | $392 |
| Vac+maint+mgmt = 25% | $1,877 | $123 | $92 |
A 1 percentage-point higher rate lifts break-even by about $136/mo. Dropping to 15% down raises it by about $84/mo. Pushing vacancy + maintenance + management from 18% to 25% of rent raises break-even by about $160/mo. Click a row to open that scenario in the calculator.
Tip: Pair this with estimating rent from comps and a realistic vacancy rate. An optimistic rent plus a razor-thin cushion is a double miss.
Red flags
Red flag: Underwriting at asking rent with almost no cushion above break-even. One longer vacancy, a tax reassessment or a rate lock that comes in high can flip the deal negative.
Red flag: Ignoring vacancy, maintenance and management in the divisor — dividing fixed costs by 1.0 instead of 0.82. That understates the rent you need by roughly the same 18% haircut FirstDoor budgets by default.
Good to know: This is educational, not investment advice. Run your own tax bill, insurance quote and loan terms in the rental cash-flow calculator, and check DSCR the way a lender will see it.
Worked example
A $200,000 single-family rental at $2,000/mo asking rent, 20% down at 7.40% for 30 years (Freddie Mac average, October 15, 2026), $2,400/yr tax, $1,200/yr insurance, 5% vacancy, 5% maintenance, 8% management. Closing costs assumed at $6,000. Illustrative deal so the cushion above break-even is easy to see.
| Fixed costs (P&I + tax/12 + ins/12) | $1,408 |
| Divisor (1 − 5% − 5% − 8%) | 0.82 |
| Break-even rent | $1,717 |
| Asking rent | $2,000 |
| Cushion | $283 |
Frequently asked questions
What is break-even rent on a rental property?
It is the lowest monthly rent at which cash flow is exactly $0 after the mortgage and operating costs. FirstDoor calculates it as (P&I + tax/12 + insurance/12 + HOA) ÷ (1 − vacancy% − maintenance% − management%). On a $200,000 example at 7.40% with 20% down and 5+5+8 defaults, break-even is about $1,717/mo.
How do you calculate break-even rent?
Add principal and interest, monthly property tax, monthly insurance and HOA. Divide by 1 minus your vacancy, maintenance and management percentages. With FirstDoor's 5% + 5% + 8% defaults, divide by 0.82. On the worked example, fixed costs of about $1,408 ÷ 0.82 ≈ $1,717/mo.
Is break-even rent the same as the 1% rule?
No. The 1% rule only compares monthly rent with purchase price. Break-even rent uses your actual loan payment, taxes, insurance, HOA and expense percentages, so two homes with the same rent-to-price ratio can have very different break-even rents.
What is a good cushion above break-even rent?
There is no single right number. FirstDoor's example has about $283/mo of cushion ($2,000 asking vs about $1,717 break-even). A thin cushion leaves little room for a longer vacancy, a repair month or a rent miss — stress-test $100–$200 lower rent before you offer.
Why does FirstDoor divide by 0.82?
Because 5% vacancy + 5% maintenance + 8% management = 18% of rent, so 82% of each rent dollar is left for fixed costs. If you underwrite at different percentages, use your own divisor — for example 10% total expenses means divide by 0.90, and 25% means divide by 0.75.
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Sources
Educational content, not financial advice. Loan programs and requirements change; confirm with a lender.