O'Reilly logo

What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 30Calculation 24: Break-Even Ratio

What It Means

You should know about the break-even ratio (BER, also sometimes called the default ratio) because it is a benchmark often used by lenders when underwriting commercial mortgages. Its purpose is to estimate how vulnerable a property is to defaulting on its debt should rental income decline. There is an old saying that when your outgo exceeds your income, your upkeep will be your downfall. Essentially, the lender is trying to gauge the proportion between your outgo and your income, so as not to share in that downfall.

You should review debt coverage ratio (another major benchmark favored by lenders) in the previous chapter and loan-to-value ratio in Part II, Calculation 26.

How to Calculate ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required