Canadian rental property calculator

How the math works

The analysis follows the same structure a lender or appraiser uses. Start with gross rent, subtract a vacancy allowance to get effective gross income, subtract operating expenses to get net operating income (NOI), then subtract the mortgage payment to get cash flow. Each line in the ledger above maps to one of those steps, so you can see exactly where a deal falls apart.

The Canadian mortgage formula is not the American one

Canadian fixed-rate mortgages compound semi-annually, not monthly. The effective monthly rate is (1 + rate/2)^2/12 − 1 rather than simply rate/12. The difference sounds academic, but on a $440,000 mortgage at 5.5% over 25 years it is about $16 a month, roughly $4,800 over a 25-year amortization. Most free calculators online are American and quietly overstate your payment; this one uses the Canadian formula everywhere, including the amortization schedule.

What counts as an operating expense

Operating expenses are the costs of running the property whether or not there is a mortgage on it: property tax, insurance, maintenance, property management, and any utilities you pay. Budgeting maintenance at 5% to 10% of gross rent is a reasonable starting range, with older properties at the high end. Management typically runs 8% to 12% if you hire it out; if you self-manage, set it to zero but be honest that you are paying yourself with your evenings. The mortgage is deliberately not an operating expense, which is what lets NOI and cap rate describe the property itself rather than your financing.

Cap rate, cash-on-cash, and total ROI measure different things

Cap rate is NOI divided by purchase price: what the property earns regardless of how you finance it, which makes it the right number for comparing properties to each other. Cash-on-cash return is annual cash flow divided by the cash you actually put in (down payment plus closing costs), which tells you what your money is earning after the bank is paid. Year-one total ROI adds the principal your tenants paid down for you, since that equity is real profit even when monthly cash flow is thin. A property can have a mediocre cap rate and a strong total ROI, or the reverse; seeing all three protects you from falling in love with one number.

Canadian rules of thumb worth knowing

• Non-owner-occupied rentals require at least 20% down. Live in one unit of a two-to-four-unit property and 5% to 10% down becomes possible with an insured mortgage.
• Closing costs vary sharply by province because of land transfer tax. Toronto charges a municipal land transfer tax on top of Ontario's, roughly doubling it, while Alberta and Saskatchewan have only modest fees.
• Vacancy allowances of 2% to 4% suit tight markets; use more in smaller centres or student-heavy rentals.
• Lenders typically count only 50% to 80% of rental income when qualifying you, and you must pass the mortgage stress test at the higher of your rate plus 2% or 5.25%.