Break-Even Occupancy
Break-even occupancy = (operating expenses + debt service) / potential gross income, and the cushion to the market occupancy before a property goes cash-flow negative. OpEx $60K + debt $90K on $200K PGI = 75%, a 17-point cushion to a 92% market. The lender/market govern.
Formula and source
BEO = (OpEx + debt service) / PGI x 100 (%); cushion = market occupancy - BEO.
The break-even (default-ratio) occupancy definition used in real-estate underwriting, by name.
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