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InvestingJuly 8, 20265 min read
Running the Numbers on an Ontario Rental Property
Cash flow, cap rate and the expenses new investors forget. A practical framework for evaluating your first income property.
A rental property is a business. Before you fall in love with a building, model it — conservatively.
Start with real revenue
Use achievable market rent for the unit as it exists today, not after an imagined renovation, and apply a vacancy allowance of at least 3%.
Then subtract every expense
- Mortgage principal and interest
- Property taxes and insurance
- Utilities you are responsible for
- Condo fees, where applicable
- Maintenance reserve (5–8% of rent) and capital reserve for roofs, furnaces and windows
- Property management, even if you self-manage today
Judge it on three numbers
- Monthly cash flow after all expenses
- Cap rate: net operating income divided by purchase price
- Cash-on-cash return against the capital you actually invest
If a deal only works with best-case rent and zero maintenance, it is not a deal.
We build these models with our investor clients before writing an offer, and we underwrite the exit as carefully as the entry.
Written by Martins Real Estate Group