Rental property cash flow
Monthly cash flow on a Canadian rental — gross rent minus vacancy allowance, mortgage payment, property tax, insurance, management, and miscellaneous.
Your scenario
Result
Lenders typically only credit 50-80% of expected rental income when qualifying you. Tax and capex may eat more than this estimate.
How rental cash flow math actually works
Rental property cash flow is simple in concept but easy to mis-estimate. Gross rent is what you collect; net cash flow is what's left after every operating expense, vacancy allowance, and the mortgage payment. Investors who assume zero vacancy and zero capex routinely report 8-10% cash-on-cash returns that don't materialize.
What to plug in realistically
- Vacancy: 4-8% in tight Canadian markets (Toronto, Vancouver); 8-15% in softer secondary markets. Zero is fantasy.
- Property tax: 0.3% to 1.3% of value annually depending on city. Vancouver low; Winnipeg high.
- Insurance: $90-$200/month for landlord coverage (higher than owner-occupied).
- Management: 8-12% of gross rent if outsourced; 0% if self-managing (but factor your time).
- Other (repairs reserve, accounting, advertising): Plan for 8-12% of gross rent over a 5-year period.
Cash-on-cash vs cap rate
Cash-on-cash uses your actual cash invested (down payment + closing costs) and accounts for leverage. Cap rate uses the full property value and ignores financing. Both matter — see our cap rate + cash-on-cash calculator for a side-by-side.
Lender treatment of rental income
Canadian lenders only credit 50-80% of expected rental income when calculating your qualifying ratios. The exact percentage varies by lender and product. Plan for the conservative end (50%) when estimating qualifying ceilings on additional purchases.
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Questions about this calculator
- How do I calculate cash flow on a Canadian rental property?
- Take gross rent, subtract the mortgage payment, property tax, insurance, condo fees, utilities you cover, property management and a realistic vacancy and maintenance allowance. What is left is cash flow. Skipping the vacancy and maintenance lines is what makes most spreadsheets show a profit that never arrives.
- What vacancy rate should I assume?
- Five percent is a common planning figure, meaning roughly two and a half weeks of the year empty. Tight urban markets justify less; single-tenant properties and student rentals justify more. The cost of one bad turnover — cleaning, repairs, listing time — usually exceeds a year of the allowance.
- How much should I set aside for maintenance?
- One percent of property value per year is the usual rule of thumb, or five to ten percent of rent. Condos need less on the unit and more via the fee; older freehold houses need more of both. The roof and the furnace are not annual costs, but they are certain ones.
- Do lenders count rental income when I qualify?
- Yes, but rarely in full. Lenders either add a haircut version of the rent to your income or offset it against the property's own costs, and the two methods produce very different results. Which one your lender uses is often the difference between qualifying and not.