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


  • 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.