Estimate cash flow, cap rate, CCA depreciation, rental income tax, capital gains and multi-year projections for any Canadian rental property. All formulas sourced from CRA T776, T4002 and T4037.
Land is not depreciable. Check your municipal assessment for the land/building split.
Class 1 at 4% declining balance. Half-year rule applies in year 1. Cannot create rental loss.
Multi-year projection
yrs
%
%
Year 1 results (pre-tax)
Monthly mortgage payment
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Monthly cash flow
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Annual cash flow
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Cap rate
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Cash-on-cash return
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Year 1 results (after tax)
After-tax monthly cash flow
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After-tax annual cash flow
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After-tax cash-on-cash return
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Income tax on rental income
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CCA deduction year 1
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Analysis
Multi-year projection
Year
Property value
Annual rent
Interest (deductible)
CCA claimed
Income tax
Pre-tax CF
After-tax CF
Cumulative after-tax CF
Mortgage balance
Sale analysis at end of hold period
Projected sale price-
Capital gain-
Capital gains tax (50% inclusion)-
CCA recapture tax-
Total tax on sale-
Equity at sale (sale price minus mortgage balance)-
Net equity after sale tax-
Cumulative after-tax cash flow over hold period-
Total return after tax (net equity + cumulative CF minus down payment)-
Capital gains use an adjusted cost base equal to the original purchase price (simplified). Closing costs, capital improvements and other ACB adjustments are not included. CRA T4037. Expenses grow at 2% per year to approximate inflation.
Results are estimates for planning and educational purposes only, not financial or tax advice. Tax calculations use formulas sourced from CRA T776, T4002 and T4037 and are based on the inputs you provide. Individual tax situations vary significantly. Vacancy, maintenance, closing costs and provincial tax nuances are not fully modeled. Always consult a qualified Canadian accountant before making investment decisions.
Cash flow first
Monthly cash flow tells you whether a property pays for itself today. It is rent minus every monthly expense including your mortgage, taxes, insurance and any management fees.
What cap rate means
Cap rate is your net operating income divided by the purchase price. In most Canadian markets, 6% or above is strong, 4 to 6% is moderate, and below 4% suggests returns depend heavily on appreciation.
After-tax return
The after-tax cash flow accounts for income tax owed on rental income each year. CCA depreciation reduces taxable rental income but creates a recapture liability when you sell.
Calculate by province
Each province page includes the full calculator pre-loaded with local market defaults, plus province-specific information on land transfer tax, rent control and landlord-tenant legislation.
Common questions about rental property investing in Canada
In major cities like Toronto and Vancouver, investors often accept 3 to 4% because of strong appreciation expectations. In mid-sized cities like Calgary, Edmonton, Ottawa and Saskatoon, 5 to 7% is more typical. As a general benchmark, 6% or above is considered strong in most Canadian markets, 4 to 6% is moderate, and below 4% suggests the property's returns depend heavily on future appreciation rather than current rental income.
Cap rate is calculated by dividing net operating income by the purchase price. Net operating income is your annual rent minus annual operating expenses including property taxes, insurance and property management fees, not including your mortgage payment. For example, a $500,000 property with $24,000 in annual rent and $6,000 in annual operating expenses has a net operating income of $18,000 and a cap rate of 3.6%.
Cap rate ignores how you financed the purchase and treats the property as if you paid cash outright. Cash-on-cash return accounts for your actual mortgage payments and measures how much annual cash flow you earn relative to the cash you personally invested as a down payment. Both metrics are useful and tell you different things about a property's performance.
Canadian law requires that mortgages compound semi-annually, not monthly. This is different from the United States, where monthly compounding is standard. Semi-annual compounding produces a slightly lower effective interest rate and therefore a slightly lower monthly payment than a US calculator would estimate for the same loan and rate. This calculator applies the correct Canadian compounding formula as required by the Interest Act of Canada.
Negative cash flow means the property costs you money each month beyond what rent covers. This is common in high-priced markets like Toronto and Vancouver, where investors accept a monthly shortfall in exchange for long-term appreciation. Whether it is acceptable depends on your financial situation, risk tolerance and confidence in future property values. A property with negative cash flow is not necessarily a bad investment, but it does require you to fund the shortfall from other income every month.
Investment properties that you do not plan to occupy require a minimum 20% down payment in Canada. CMHC mortgage insurance is not available for non-owner-occupied investment properties. The mortgage stress test also requires you to qualify at either your contract rate plus 2% or 5.25%, whichever is higher. If you plan to live in one unit of a small multi-unit property, different rules may apply. Speak with a mortgage broker familiar with investment properties for your specific situation.
Common deductible expenses for Canadian rental properties include mortgage interest (not principal repayment), property taxes, insurance premiums, property management fees, repairs and maintenance, advertising costs to find tenants and professional fees for accounting or legal advice related to the property. You can also claim Capital Cost Allowance, which is depreciation at 4% declining balance on the building portion. Note that CCA recapture applies when you sell. A Canadian accountant familiar with rental properties should review your specific situation.
How the calculations work
Mortgage payments use Canadian semi-annual compounding as required by the Interest Act of Canada. The CCA calculation applies Class 1 at 4% declining balance (CRA T4002), with the half-year rule limiting the first year to 2%. CCA cannot exceed net rental income before CCA, as required by CRA T776 line 9936. Mortgage interest is deductible from rental income per CRA T776 line 8710. Capital gains use a 50% inclusion rate on all capital gains per the CRA T4037 documented in CRA T4037. Marginal tax rates should be verified at Canada.ca — Tax rates and income brackets for individuals. Operating expenses grow at 2% per year in multi-year projections. Capital gains use the purchase price as the adjusted cost base, which is a simplification. Full methodology details are on the methodology page.