Question 1

How do you calculate cash flow on a rental property?

Accepted Answer

Start with the rent you expect to collect after vacancy. Subtract operating costs (property tax, insurance, maintenance, utilities you pay and any management fee) to get net operating income (NOI). Then subtract your mortgage payments. What is left is your cash flow. A positive number means the property pays for itself; a negative one means you top it up every month.

Question 2

What is a good cap rate in Ontario?

Accepted Answer

Cap rate is NOI divided by the purchase price. In Ontario’s larger cities, residential cap rates are often in the low-to-mid single digits because prices are high relative to rents. For example, a $750,000 home renting for $3,500 a month works out to about 4.0% with typical costs. Many investors compare cap rates between properties rather than aiming for one fixed number.

Question 3

What is GIM (gross income multiplier)?

Accepted Answer

GIM is the purchase price divided by gross annual rent. It is a quick screening number: a lower GIM means you pay less for each dollar of rent. A $750,000 home renting for $3,500 a month has a GIM of about 17.9. It ignores expenses, so use cap rate and cash flow for the real picture.

Question 4

What is cash-on-cash return?

Accepted Answer

It is your yearly cash flow divided by the cash you put in (here, your down payment). It shows the return on your own money after the mortgage, which makes it useful for comparing a rental with other investments.

Question 5

What is DSCR and why do lenders care?

Accepted Answer

The debt service coverage ratio is NOI divided by your yearly mortgage payments. A DSCR of 1.0 means the property’s income exactly covers the mortgage. Lenders financing rental properties often look for around 1.2 or higher.

Question 6

How much down payment do I need for a rental property in Ontario?

Accepted Answer

If you will not live in the property, plan on at least 20% down. If you live in one of the units, the regular minimum applies to 1–2 unit homes (5% of the first $500,000 and 10% of the rest up to $1.5 million), and 3–4 unit homes need at least 10%.

Question 7

Can I raise the rent every year in Ontario?

Accepted Answer

For most units first occupied before November 15, 2018, rent can be raised once every 12 months by up to the provincial guideline, which is 2.1% for 2026. Units first occupied for residential purposes after November 15, 2018 are exempt from the guideline, but rent can still only be raised once a year with proper notice.

Question 8

What vacancy rate should I use?

Accepted Answer

Use a realistic allowance for empty months and unpaid rent. Many investors use 3% to 5% of gross rent. Student rentals and markets with more supply may need more.

Metric	Formula	Use it for
Net operating income (NOI)	Rent collected − operating costs	Before the mortgage
Cash flow	NOI − mortgage payments	What’s left each year
Cap rate	NOI ÷ purchase price	Compare properties
GIM	Purchase price ÷ gross annual rent	Quick screen
Cash-on-cash	Cash flow ÷ down payment	Return on your money
DSCR	NOI ÷ mortgage payments	Lenders look for ~1.2+

Rental property cash flow calculator

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