Rental Property Analyzer

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. With none of your own cash in up front there is nothing to divide by, so it shows a dash, as does the annualized ROI.

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.

The year-one rent chart walks from gross rent, less vacancy and each operating cost, to NOI; then less mortgage interest and principal to the cash flow before tax (the headline × 12); then less income tax, or plus the tax a rental loss saves, to the after-tax cash flow in the projection's first row. Principal is drawn in green because it becomes your equity rather than a cost.

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. 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). The equity chart stacks those on your down payment and adds the after-tax cash flow as a running total, below zero when you are topping up, so the cost of carrying the property sits next to the equity it builds. A price decline is drawn below zero too, and a year's total (in the tooltip) is your equity plus that running cash flow, before selling costs and tax. Total profit at exit = net sale proceeds + cumulative after-tax cash flow − cash invested; annualized ROI compounds that over the holding period on the cash you put in up front. We also compute the IRR, a money-weighted return (the discount rate that zeroes out the cash-flow stream, top-ups and sale included), and the NPV against your required return. Every dollar figure is nominal, in the dollars of the year it happens, with no adjustment for inflation; the NPV is the one figure discounted back to today, at your required return rather than at inflation.

Profit if you sold in any year

For each year, profit if sold = value × (1 − selling costs %) − mortgage balance − capital gains tax + after-tax cash flow to date − cash invested, the same calculation as the exit at the end of your holding period, so the last point is your total profit. Year 0 is selling right after closing, which loses the closing costs, any renovation and the selling costs. The dashed line is the index cashed out in the same year: the cash invested plus every top-up up to then, compounded at the index return, less tax on the gain. Green shading marks the years the rental is ahead, blue the years the index is. The markers show the first year from which the rental stays in profit, and stays ahead of the index, through the end of your holding period.

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. The taxable half of the gain is added in the year you sell, on top of your other income and that year's net rental income, so it is taxed at the marginal rates that actually apply that year. A loss on the sale (or on the index) can't be deducted from other income, so neither earns a refund here. Rates come from the same brackets as the capital gains tax calculator, for the province chosen.

The index-fund benchmark

The benchmark invests the same out-of-pocket cash the property consumes, the cash you put in up front (down payment, closing costs and renovation) 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. Cash the rental pays you is counted at face value and not reinvested, so a cash-flow-positive rental is compared a little conservatively.

The appreciation and mortgage rate grid

Each cell re-runs the whole projection with only two inputs changed, appreciation (rows, in whole-point steps) and the mortgage rate (columns, in half-point steps, one below yours and three above, since renewal risk runs up), and shows total profit − index after-tax gain. The index is recomputed for every cell, because a higher rate means bigger top-ups for it to invest. The outlined cell is your own scenario, so it matches the exit chart to the dollar. The rate is held for the whole holding period; a real mortgage renews every few years. With no mortgage (an all-cash purchase) the rate changes nothing, so the grid shows appreciation alone. The appreciation the rental needs to match the index is found by bisection: profit rises with appreciation while the index does not depend on it, so there is at most one crossing.

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. The index is taxed only when it is cashed out, not on distributions along the way. Depreciation and recapture in particular can materially change after-tax results, confirm with an accountant.