Key Metrics Summary
| Metric |
Formula |
Good Target |
| Cap Rate |
NOI ÷ Property Value |
4-8% |
| Cash-on-Cash |
Annual Cash Flow ÷ Cash Invested |
5-10% |
| Cash Flow |
Rent - All Expenses |
Positive |
| Total ROI |
All Returns ÷ Cash Invested |
10-15%+ |
| GRM |
Property Price ÷ Annual Rent |
8-15 |
Calculating Cash Flow
Monthly Income
| Income Type |
Description |
| Rent |
Monthly rent collected |
| Parking |
If separate |
| Laundry |
Coin laundry revenue |
| Storage |
Additional fees |
| Total Income |
Sum of all |
Monthly Expenses
| Expense |
Typical % of Rent |
| Mortgage (P+I) |
50-65% |
| Property taxes |
8-15% |
| Insurance |
2-4% |
| Maintenance |
5-10% |
| Property management |
8-10% |
| Vacancy allowance |
5-8% |
| Utilities (if included) |
0-15% |
| Condo fees |
0-30% |
Example Cash Flow
| Item |
Monthly |
| Income |
|
| Rent |
$2,500 |
| Expenses |
|
| Mortgage |
$1,400 |
| Property tax |
$350 |
| Insurance |
$80 |
| Maintenance reserve |
$150 |
| Management (8%) |
$200 |
| Vacancy (5%) |
$125 |
| Total Expenses |
$2,305 |
| Cash Flow |
$195 |
Cap Rate Calculator
Cap Rate = Net Operating Income ÷ Property Value × 100
Example
| Item |
Amount |
| Annual Rent |
$30,000 |
| Vacancy (5%) |
-$1,500 |
| Effective Income |
$28,500 |
| Property Tax |
-$4,200 |
| Insurance |
-$960 |
| Maintenance |
-$1,800 |
| Management |
-$2,400 |
| NOI |
$19,140 |
| Property Value |
$500,000 |
| Cap Rate |
3.8% |
Cap Rate by City (Approximate)
| City |
Typical Cap Rate |
| Toronto |
3-4% |
| Vancouver |
2.5-3.5% |
| Calgary |
4.5-6% |
| Edmonton |
5-6.5% |
| Ottawa |
4-5% |
| Montreal |
4-5% |
| Halifax |
5-6% |
| Winnipeg |
5-7% |
Lower cap rates in expensive cities reflect appreciation potential.
Cash-on-Cash Return
Cash-on-Cash = Annual Cash Flow ÷ Total Cash Invested × 100
Cash Invested Includes
| Item |
Typical Amount |
| Down payment |
20%+ of price |
| Closing costs |
1.5-4% |
| Immediate repairs |
Varies |
| Furnishing (if applicable) |
Varies |
Example
| Item |
Amount |
| Property Price |
$500,000 |
| Down Payment (20%) |
$100,000 |
| Closing Costs |
$10,000 |
| Repairs |
$5,000 |
| Total Cash Invested |
$115,000 |
| Annual Cash Flow |
$2,340 |
| Cash-on-Cash |
2.0% |
Total ROI Calculation
All Return Components
| Component |
Description |
| Cash flow |
Net income after expenses |
| Principal paydown |
Mortgage pays down equity |
| Appreciation |
Property value increase |
| Tax benefits |
Deductions, deferrals |
Example Total ROI
| Return Source |
Annual Value |
| Property Value |
$500,000 |
| Cash Invested |
$115,000 |
| Cash Flow |
$2,340 |
| Principal Paydown |
$7,200 |
| Appreciation (4%) |
$20,000 |
| Total Return |
$29,540 |
| Total ROI |
25.7% |
This shows why investors accept low cash flow in appreciating markets.
The 1% Rule
Quick Assessment
| Rule |
Target |
| 1% Rule |
Monthly rent ≥ 1% of purchase price |
| 2% Rule |
Excellent cash flow (rare in Canada) |
Examples
| Property Price |
1% Target Rent |
Achievable? |
| $300,000 |
$3,000/month |
Possible (smaller cities) |
| $500,000 |
$5,000/month |
Difficult |
| $800,000 |
$8,000/month |
Very rare |
| $1,000,000 |
$10,000/month |
Almost never |
Most Canadian properties don’t meet 1% rule. Focus on total ROI.
Expense Breakdown Guide
Property Taxes
| City |
Approx. Rate (Residential) |
| Toronto |
0.6% |
| Vancouver |
0.25% |
| Calgary |
0.75% |
| Edmonton |
0.85% |
| Montreal |
0.9% |
| Halifax |
1.2% |
Insurance Costs
| Property Type |
Annual Cost |
| Single family |
$1,000-$2,000 |
| Condo |
$500-$1,000 |
| Multi-unit |
$2,000-$5,000+ |
Maintenance Reserve
| Property Age |
Reserve % |
| New (0-10 years) |
5% |
| Middle (10-25 years) |
7.5% |
| Older (25+ years) |
10-15% |
Common Major Repairs
| Item |
Cost |
Lifespan |
| Roof |
$8,000-$15,000 |
20-30 years |
| Furnace |
$4,000-$7,000 |
15-20 years |
| A/C |
$4,000-$6,000 |
15 years |
| Water heater |
$1,500-$2,500 |
10-15 years |
| Appliances |
$500-$2,000 each |
10-15 years |
Financing Impact on ROI
Down Payment Scenarios
| Down Payment |
Mortgage |
Monthly P&I* |
Cash Flow |
| 20% |
$400,000 |
$2,100 |
-$300 |
| 25% |
$375,000 |
$1,970 |
-$170 |
| 35% |
$325,000 |
$1,705 |
$95 |
| 50% |
$250,000 |
$1,315 |
$485 |
*At 5% interest rate, 25-year amortization, $500K property, $2,500 rent.
Cash-on-Cash vs Down Payment
| Down Payment |
Cash Invested |
Cash Flow |
Cash-on-Cash |
| 20% |
$115,000 |
-$3,600 |
-3.1% |
| 35% |
$190,000 |
$1,140 |
0.6% |
| 50% |
$265,000 |
$5,820 |
2.2% |
Lower down payment = worse cash flow but better use of capital (if appreciation occurs).
Multi-Unit Analysis
Per-Unit Economics
| Units |
Total Rent |
Expenses |
Cash Flow |
Per Unit |
| Duplex |
$4,500 |
$3,800 |
$700 |
$350 |
| Triplex |
$6,300 |
$4,900 |
$1,400 |
$467 |
| Fourplex |
$8,000 |
$6,000 |
$2,000 |
$500 |
Multi-unit often has better cash flow per dollar invested.
Tax Considerations
Deductible Expenses
| Expense |
Deductible? |
| Mortgage interest |
✅ Yes |
| Property taxes |
✅ Yes |
| Insurance |
✅ Yes |
| Repairs |
✅ Yes |
| Property management |
✅ Yes |
| Advertising |
✅ Yes |
| Travel to property |
✅ Reasonable |
| Utilities (if paid) |
✅ Yes |
| CCA depreciation |
✅ Optional |
| Mortgage principal |
❌ No |
CCA Depreciation
| Building Class |
Rate |
| Class 1 (most buildings) |
4% |
Using CCA reduces current taxes but increases tax on sale.
Decision Framework
Good Investment Signs
| Indicator |
Target |
| Positive cash flow |
After all expenses |
| Cap rate |
Above local average |
| Growing area |
Population, jobs |
| Below market rent |
Value-add opportunity |
| Deferred maintenance |
Low |
Warning Signs
| Red Flag |
Risk |
| Negative cash flow |
Depends on appreciation |
| Very low cap rate |
Overpriced |
| Declining area |
Value loss |
| Major repairs needed |
Hidden costs |
| High vacancy area |
Income risk |