Consider a $650,000 rental with $260,000 down and $3,600 in monthly rent. It brings in about $402 a month after the mortgage, with a cap rate of 4.89%, and rent covers the mortgage 1.18 times. After 10 years, with 3% price growth and selling costs, total profit is about $341,000 on $280,000 invested.
What the calculator measures
You get four numbers: monthly cash flow, cap rate, cash-on-cash return and debt coverage. After that comes a yearly projection of value, mortgage balance and equity. Together they show the income you have now and the wealth you may build later.
Cash flow
Cash flow is the rent collected minus operating costs and the mortgage. In Toronto, where prices are high against rents, it can be negative. That means topping up the property every month. The calculator shows the amount. Plan for it.
Debt coverage
Debt service coverage is net operating income divided by the yearly mortgage payments. Lenders often want 1.1 to 1.25 or more. Below 1.1 the calculator shows a warning, since the loan may be hard to get or the property may cost you money every month.
Growth and costs over time
Price growth and yearly increases in rent and costs can be set. The model raises income and costs at the same rate while the mortgage payment stays fixed. Rising rent improves cash flow, and paying down the loan grows equity.
Total profit
Take the home value after selling costs, subtract the mortgage balance, add the cash flow collected and subtract the cash you put in. The result is what you would have made by selling at the end of the holding period.
What is left out
Income tax isn’t included. Rental income is taxable, and selling a rental triggers capital gains tax. Large repairs, rate changes at renewal and long vacancies aren’t modelled either. Add a cushion to the repair and vacancy fields.
Toronto and Ontario landlords
Ontario landlords follow the Residential Tenancies Act, including the yearly rent guideline for most older units. New tenants can be charged market rent, but a sitting tenant can’t be raised past the guideline. Set rent growth near 2% for a long-term tenant, and higher only if you expect turnover. A condo has fewer surprises than a house, since the corporation handles the building, yet fees can jump after a reserve fund study. Look at the last two years of fee changes and the reserve fund report before buying, then enter the real monthly fee.
Stress testing the deal
Raise the mortgage rate by two points, add a month of vacancy and a large repair. A deal that still holds up after all three shocks has room to spare. Deeply negative cash flow? Build a bigger cushion. Renewal rates can differ a lot from today’s, so test that as well.
Where to go next
Compare the simple return in the cap rate calculator and the cash-on-cash return calculator. Estimate the tax on the sale with the capital gains tax calculator. Check the mortgage in the mortgage calculator, and the risk of an empty unit with the vacant home tax calculator.
Frequently asked questions
How is rental cash flow calculated?
Rent after vacancy, minus operating costs, minus the mortgage payments.
What is debt service coverage?
Net operating income divided by yearly mortgage payments.
Is rental income taxable in Canada?
Yes. This calculator does not include income tax.
What vacancy rate should I use?
Between 3% and 5% is common in Ontario cities. Use more for older buildings.
Why is cash flow negative?
High prices and rates can make the mortgage larger than the net rent.
Does the calculator include selling costs?
Yes, as a percentage of the final value.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.