The break even ratio (BER) is a calculation routinely used by lenders. The BER is expressed as a percentage; this percentage is used by lenders to decide whether or not to underwrite a loan for a particular piece of rental income property.
First, debt services and operating expenses are totaled. That number is then divided by the gross operating income. The lower the percentageis, the better.
The cash break even ratio is also commonly referred to as the “default ratio.”