# Blog

### Breakeven Cashflow Calculator

With interest rates rising many investors are seeing their free cash flow from their property reducing so it is a common question to ask at what interest rate will my property’s cash flow break even (free cash flow of zero).

For a simple scenario of a fully leased property with no expenses other than interest then the mathematics is pretty simple and can be shown as follows:

- FCF = PP. PY - PP.LVR.i

Where:

- FCF = Free Cash Flow
- PP = Purchase Price
- PY = Purchase Yield
- LVR = Loan to Value Ratio
- i = variable interest rate

It is then a simple question to set the Free cashflow to zero, and solve for the interest rate which gives:

- LVR.i = Py
- i =PY/LVR

So a couple of worked examples:

- If you are looking at buying a 5% yielding property at 70% LVR, then the breakeven interest rate is : 5%/0.7 = 7.14%
- If you are looking at buying a 8% yielding property at 80%, then the breakeven interest rate is 8%/0.8 = 10%.

Expressing this information as a chart we then have the following where the above examples can also be read directly from the chart.