Rental Property Analyzer
Is that rental actually an investment or a monthly bill? See cap rate, cash-on-cash, and DSCR the way a lender does, plus a 10-year after-tax projection with rent growth, capital gains at sale, and how it stacks up against just buying an index fund.
Rates & rules verified · July 2026Primary sources: CRA – Tax rates and income brackets · Revenu Québec – Income tax rates
Where your equity comes from
Your down payment stays put; wealth is built by paying down the mortgage and by the property appreciating. This is the whole return engine on a leveraged rental.
Where each year's rent goes
Year-one gross rent split across the mortgage, operating costs, and the vacancy allowance, with whatever's left (or the shortfall you cover) as cash flow.
Your money out the door
Selling the property at the end of your holding period, netting out costs, the mortgage, and capital gains tax, then adding back the rent you banked along the way.
| Exit waterfall | Amount |
|---|
Year-by-year projection
Rent and expenses grow each year; cash flow is after income tax on net rental income.
| Year | Rent | NOI | Cash flow | Balance | Value | Equity |
|---|
How this is calculated
Three yardsticks, three questions
Cap rate = NOI ÷ purchase price. Net operating income is rent (less a vacancy allowance) minus operating costs, property tax, insurance, maintenance, condo fees, management, landlord utilities, but not the mortgage. Cap rate measures the property itself, independent of how you finance it, so you can compare deals apples-to-apples.
Cash-on-cash = annual cash flow ÷ cash invested, where cash invested is your down payment + closing costs + renovation. This is the return on the actual dollars you put in, after the mortgage, the number that tells you whether leverage is working for you.
DSCR (debt-service coverage ratio) = NOI ÷ annual mortgage payments. It's the lender's test: below 1.0 the rent doesn't cover the mortgage. Canadian lenders generally want DSCR ≥ 1.1 to 1.2 to approve an investment mortgage.
Canadian mortgage math
Fixed rates compound semi-annually, so the effective monthly rate is (1 + rate/2)^(2/12) − 1, not rate/12. This tool uses the same engine as the mortgage calculator. Note: rentals require at least 20% down. CMHC insurance isn't available on non-owner-occupied property, so a low-down-payment scenario is flagged.
The 10-year (or longer) projection
Each year, rent grows at your rent-growth rate, expenses grow at expense inflation, and the mortgage amortizes month by month. Equity is built two ways: principal paydown (loan minus remaining balance) and appreciation (value minus purchase price). Total profit at exit = net sale proceeds + cumulative after-tax cash flow − cash invested; annualized ROI compounds that over the holding period. We also compute the IRR (the discount rate that zeroes out the cash-flow stream) and the NPV against your required return.
Tax treatment
Net rental income (rent − operating costs − mortgage interest, but not principal) stacks on your other income at your combined federal + provincial marginal rate; a rental loss offsets other income. At sale, 50% of the capital gain is taxable (the inclusion rate confirmed for 2026), the principal-residence exemption does not apply to a rental. Capital gains tax is estimated at your marginal rate for the province chosen, using the same brackets as the capital gains tax calculator.
The honest benchmark
The benchmark now invests the same out-of-pocket cash the property consumes, your down payment plus every negative-cash-flow top-up in the years the rent doesn't cover the mortgage, compounded at a diversified-index return (FP Canada's 2026 assumptions: 5.2% balanced, ~6.3% equity). The gain is taxed as a capital gain (50% inclusion) at your marginal rate, unless you set the index to be held in a TFSA/registered account. Both sides are then after-tax, so you can see whether the effort of being a landlord is beating a hands-off portfolio.
What this doesn't model
Capital cost allowance (CCA) and its recapture, HST on new-build purchases, rent-control caps by province, refinancing or HELOC extraction, unexpected major repairs, and rate changes at renewal. Depreciation and recapture in particular can materially change after-tax results, confirm with an accountant.
Common questions
What is a good cap rate for a Canadian rental property?
Cap rate is net operating income divided by purchase price, and it ignores financing. In most Canadian markets cap rates run roughly 3–6%, lower in Toronto and Vancouver where prices are high relative to rents, higher in smaller cities. A higher cap rate means more income per dollar of price, but compare only within the same market, since cap rates also reflect risk and growth expectations.
How much down payment do I need for a rental property in Canada?
At least 20%. CMHC and other default insurers do not insure non-owner-occupied rental properties, so the low-down-payment programs available to owner-occupiers do not apply. Lenders require a minimum 20% down, and many prefer 25–35% for investment mortgages.
What is DSCR and what do lenders want to see?
The debt-service coverage ratio is net operating income divided by annual mortgage payments. A DSCR of 1.0 means rent exactly covers the mortgage after expenses; below 1.0 the property loses money before you even account for taxes. Canadian lenders typically want a DSCR of at least 1.1 to 1.2 on a rental to approve financing.
How is rental income taxed in Canada?
Net rental income (rent minus operating expenses and mortgage interest, but not principal) is added to your other income and taxed at your marginal rate. A rental loss can offset other income. When you sell, 50% of the capital gain is taxable, and any capital cost allowance (depreciation) you claimed is recaptured. A rental is not your principal residence, so the principal-residence exemption does not apply.
Should I buy a rental or just invest the money in an index fund?
It depends on leverage, cash flow, and your appreciation assumption. A mortgage lets a rental control a large asset with a small down payment, amplifying gains, and losses. A diversified index fund needs no tenants, repairs, or land-transfer tax and is far more liquid. This tool compares the property's projected after-tax profit against investing the same cash at a diversified-index return so you can see the trade-off.