What Does Break-Even Point Mean?

A break-even point (BEP) is when the earnings on an investment equal the original cost. We can calculate the break-even point for a stock trade, real estate investment, or business. It’s an important inflection point where an investment or company no longer loses money.

Here’s a closer look at what a break-even point means, how to calculate it, why it’s important, and some examples.

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A professional who offers guidance on financial planning, investments, and wealth management to individuals or businesses.

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Likewise, a real estate investment could have high upfront costs from commissions and renovations that an investor would need to overcome before reaching profitability. After calculating the break-even cost, an investor might determine that the investment isn’t worthwhile since it might take too long or too much effort to get the BEP.

Homeowners can also use their break-even point to determine the price to sell their home and not lose money following a major renovation. They might decide that their real estate return on investment would be too low, which could lead them to scale it down to a level where it would be more likely to break even.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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