With interest rates seemingly being in constant flux lately, the question of what the current break even point for a property kept coming up from my clients. In an attempt to eliminate the need to do the calculation over and over again, I set out to create a spreadsheet to simply display the GRM for a property that corresponds with breaking even (no positive or negative cash flow) at different interest rates.
This calculation requires assumptions for expenses and vacancy, and I used 35% of GSI for expenses and a 5% vacancy rate. The result is Table 1.
As an extension of the first table, I decided to create a graphic that displayed the required down payment to break even for given interest rate and GRM. The result is Table 2.
– Josh Ess
There is a link to the downloadable PDF below!