Count available nights for each rentable unit, then divide the building’s fixed cash obligations by contribution per paid unit-night. A fourplex does not have only 365 available nights. Break-even is a cash threshold to compare with a conservative forecast; it is not expected occupancy or lender approval.
Worked hypothetical: 1,089 paid unit-nights
Assume four legally rentable units, each unavailable for 10 of 365 calendar nights. Available inventory is 4 × 355 = 1,420 unit-nights. This simplified case gives each unit the same realized lodging ADR and variable cost; different units need separate contributions in a real model.
At a hypothetical $150 ADR, 20% revenue-linked distribution/management fees and $30 of variable cost per paid unit-night, contribution is $150 × 80% − $30 = $90. The variable line is after any retained guest cleaning fee; exclude pass-through taxes and avoid counting a fee in both lines.
| Annual fixed cash obligation | Assumption |
|---|---|
| Principal and interest debt service | $72,000 |
| Taxes and insurance | $14,000 |
| Fixed utilities and common service | $6,000 |
| Replacement-reserve funding | $6,000 |
| Total annual obligations | $98,000 |
Required paid unit-nights = $98,000 ÷ $90 = 1,088.89, rounded up to 1,089 whole unit-nights. Break-even occupancy = 1,089 ÷ 1,420 = 76.7%. This owner cash threshold includes debt and reserve funding. It is not accounting NOI or a DSCR numerator.
Stress the rate and the usable inventory separately
| Case | Contribution per night | Required / available unit-nights | Threshold |
|---|---|---|---|
| Base: $150 ADR | $90 | 1,089 / 1,420 | 76.7% |
| ADR falls 10% to $135 | $78 | 1,257 / 1,420 | 88.5% |
| Base ADR; one unit loses another 90 nights | $90 | 1,089 / 1,330 | 81.9% |
A result above 100% cannot be covered within that inventory at that contribution. Higher minimum stays, owner use, repair closures or permit delays can change the denominator. Do not “solve” an infeasible case by deleting reserve funding or assuming every blocked date was booked.
Reconcile the paid, available and calendar nights and compare monthly demand with the threshold. Use the separate lender DSCR and investor cash-flow checks for the loan question.
One long-term unit does not guarantee an easier threshold
Assume one unit becomes a lawful long-term rental at an invented $1,800 monthly rent. Deduct 20% for incremental leased-unit expenses that are not already in the fixed building stack: $21,600 × 80% = $17,280 annual contribution. Keep the $98,000 building obligations unchanged for this comparison.
The three STR units have 3 × 355 = 1,065 available unit-nights. They must cover $98,000 − $17,280 = $80,720, requiring 897 paid unit-nights at $90 contribution: 84.2% occupancy. The lease offsets obligations but also removes STR inventory. Verify leases, unit permissions and financing rather than assuming mixed use is allowed.
Take these records to the offer decision
- Unit-by-unit calendar, lease and permit/use file, including existing residents and possession dates.
- Realized rate and revenue evidence for the same reporting period; seasonal comparables for each unit type.
- Utility/meter allocation, turnover cost, shared repairs and fixed building costs.
- Written debt terms, buyer tax/insurance estimates and a component replacement schedule.
Verify seller income before relying on its ADR. Proceed only if the conservative unit-level forecast can cover the cash threshold and the monthly deficits fit your retained reserves. Equal unit rates are a disclosed simplification, not a market fact.
Frequently asked questions
Do I divide fourplex paid nights by 365?
Only if measuring one unit for one full year. For a building, aggregate each unit’s available nights; four fully available units have 1,460 unit-nights before closures or other exclusions.
Does 76.7% mean the property will achieve that occupancy?
No. It is the calculated cash threshold under invented costs and rates. A forecast requires independent unit-level and seasonal evidence.
Can I combine long-term and short-term units?
Verify use, leases and lender terms first. Then subtract the leased unit’s contribution from obligations without double-counting expenses, and remove its nights from STR inventory.