Break-even occupancy
Find the occupied-income threshold for operations and debt service.
Your scenario
Ratios above 100% mean modeled potential income cannot cover the entered costs. Other income is assumed fixed and collectible; variable expenses scale with collected base rent. Excludes capital expenditure and income taxes.
How the model works
Required occupancy = (fixed expenses + applicable debt service − fixed other income) ÷ [potential base rent × (1 − variable expense ratio)].
Worked illustration
With $500,000 potential rent and 10% variable costs, each 1% occupancy provides $4,500 toward fixed costs. The debt-inclusive requirement is $315,000 ÷ $450,000 = 70%.
Use collectible revenue and classify expenses
The occupancy result is an income-weighted screening measure under a uniform-rent assumption. Enter potential collectible base rent at full occupancy, rather than the sum of unsupported asking rents. Fixed other income is assumed to continue at every occupancy level. If parking, recoveries or other income declines with vacancy, a more detailed model is needed.
Separate expenses that remain even when space is empty from costs that truly vary with collected base rent. Property tax, many insurance costs and debt service can remain while revenue falls. A general expense ratio copied from stabilized operations can understate vacancy exposure. The variable percentage input should reflect the specific convention used here, not the entire operating-expense ratio.
Interpret an infeasible result
A result above 100% is an economic warning under the inputs, not a value to cap at full occupancy. The modeled property cannot cover the included obligations even if all potential base rent is collected. Review rent assumptions, expenses, debt burden and the investment basis. The tool reports operating and debt-inclusive thresholds separately so you can see the financing effect.
Neither threshold establishes cash available for owners. Tenant improvements, commissions, major repairs, replacement funding and ownership fees may still require cash. A fully leased building with concessions or unpaid rent can fail the income threshold. Test a lease-by-lease downside where suite rents, free-rent periods and tenant credit differ materially; physical occupied area alone cannot describe that scenario.
What to check before relying on the result
Assumes consistent rent per occupied area and fixed other income. Does not model differing suite rents, leasing costs or rent-free periods.
Model an adverse scenario as well as the expected outcome. Change one assumption at a time to identify what drives the result, then test combinations that could occur together. A property can meet a modeled financial threshold and still fail diligence, legal requirements or lender approval.
Keep the cash-flow definitions consistent
Distinguish recurring property operations from tenant improvements, leasing commissions, capital expenditure, financing costs and entity-level distributions. Verify whether reserves are expenses, funding requirements or cash movements in the documents you are analyzing. A cash-flow convention must remain consistent across the model and the comparison.
Research context
Consult the source material for this topic. The model is an original educational calculation, not a reproduction of a lender’s underwriting system. The initial numbers are hypothetical inputs rather than current market terms. No scenario inputs are transmitted or saved by this calculator.