What is rental property cash flow?
Monthly cash flow after reserve = scheduled rent − vacancy allowance − operating expenses − mortgage principal and interest − capital reserve contribution.
This is a planning view of the cash available from the property under your assumptions. It is not the same as net operating income (NOI), taxable rental income or a promise that the property will fund itself. Work in one currency and period: the examples below use Canadian dollars and monthly figures.
For a useful analysis, record where each input came from. Separate a current lease from a proposed asking rent, a recent insurance quote from an old owner estimate, and a lender quote from an assumed mortgage rate. Keep the less certain figures visible when discussing the deal with a buyer.
A worked Canadian rental example
Maple Duplex is a fictional Ontario property, not a listing or a statement of typical returns. It has a $650,000 purchase price, 20% down, a $520,000 mortgage, a 5.25% nominal annual rate and 25-year amortization. Scheduled rent is $4,500 per month and the vacancy assumption is 5%.
| Line item | Monthly amount |
|---|---|
| Scheduled rent | $4,500.00 |
| Less vacancy allowance, 5% | −$225.00 |
| Effective rent | $4,275.00 |
| Operating expenses | −$1,270.33 |
| Net operating income | $3,004.67 |
| Mortgage principal and interest | −$3,098.77 |
| Cash flow before capital reserve | −$94.11 |
| Capital reserve contribution | −$150.00 |
| Cash flow after reserve | −$244.11 |
Calculations use unrounded figures internally; displayed amounts are rounded to cents. The negative result stays negative. It is a reason to examine the inputs, financing and buyer's cash requirements, rather than a number to hide.
In this example, operating expenses comprise property tax, insurance, maintenance, management and other ongoing costs. Condo or strata fees are zero for this fictional property; use the actual amount when they apply.
Use the compounding convention in the mortgage quote
The analyzer models a nominal annual mortgage rate compounded semi-annually, with monthly payments. If j is the quoted annual rate as a decimal, the effective monthly rate is c = (1 + j / 2)2/12 − 1. Apply that monthly rate over the amortization months to the financed principal.
For the $520,000 example at 5.25% over 300 months, the payment is $3,098.77. The workbook result was checked against the Financial Consumer Agency of Canada's mortgage calculator. This is an independent calculation check, not an endorsement. Confirm the actual lender's compounding, payment frequency, premium treatment and terms; mortgage products can differ.
Do not apply homeowner high-ratio insurance rules to every investment property. CMHC describes its Income Property program for eligible 2–4-unit rental properties separately. Select the relevant financing case and use the lender's quote to confirm eligibility and premiums.
Separate operating costs, debt and capital reserves
NOI describes property operations before financing. It excludes mortgage principal and interest. The cash-flow view then subtracts the mortgage payment, including principal, because both principal and interest consume cash during the month.
Keep a capital reserve contribution separate from routine maintenance. Replacing a roof and arranging ordinary repairs do not have the same timing or cash impact. The workbook shows cash flow before reserve and after reserve so you can see the effect of the planned contribution. It is a planning allocation, not a guarantee that the reserve will cover future work.
Do not copy this cash-flow result into a tax return. CRA's rental-property CCA guidance describes a separate tax framework. The tool does not calculate income tax, a CCA deduction, recapture or rebates. Review the tax treatment with an accountant.
Check the upfront cash as well as the monthly result
The down payment is one part of the initial investment. Work through transfer taxes where applicable, registration, legal or notary fees, title insurance, adjustments and other transaction costs. Include any cash-paid insurance premium or premium tax once, rather than double counting a financed premium.
In the fictional Maple example, $130,000 down plus $13,375 in closing costs gives $143,375 cash to close. Upfront work and a starting reserve bring the model's total initial cash invested to $152,375. Those are example assumptions, not fee quotes. An exemption, municipal tax or lender requirement can change the actual cash needed.
The analyzer provides provincial base transfer-tax logic where applicable and editable overrides. Confirm current local costs and transaction-specific exceptions for the province, territory and municipality. A zero base transfer tax does not mean a closing has no registration or transfer-related costs.
Test the assumptions before comparing the deals
Change one assumption at a time: lower rent, higher vacancy, a larger repair allowance or a different financing quote. Record what changed and why. A small positive result can disappear when the buyer's actual costs replace the initial estimate.
The workbook also includes an illustrative qualifying-rate scenario. OSFI's minimum qualifying rate for uninsured mortgages is currently the greater of the contract rate plus two percentage points or 5.25%, subject to its scope and exceptions. At the example's 5.25% contract rate, the illustration uses 7.25%. A stress-rate payment is not a financing approval: the lender evaluates additional information and applies its own requirements.
Use cap rate, cash-on-cash and DSCR together when comparing properties. The Canadian Rental Property Cash-Flow Analyzer puts the inputs, cash requirements, monthly result and three-property comparison in one Google Sheets-first workbook. Its buyer file starts without fictional property data.