Cash-on-cash · Canada

Canadian cash-on-cash return calculator

Cap rate ignores your mortgage. Cash-on-cash does not. Enter your purchase price, your down payment, and your real monthly numbers. You get the return on the actual cash you put in during year one.

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Enter your numbers to see the return.

Annual pre-tax cash flow–

Monthly cash flow–

Total cash invested–

Annual debt service–

This is year one. BrickROI runs all 25.

Cash-on-cash is year one. BrickROI runs all 25 years for you: how the return climbs as you pay down principal and rents rise, plus DSCR for your lender, CMHC and MLI Select paths, and a lender-ready PDF. Paste a Canadian listing and see the full picture in two minutes.

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How cash-on-cash works in Canada

Cash-on-cash return answers a plain question: for every dollar of your own money you put into this deal, how many cents come back in the first year? You take your pre-tax cash flow for the year and divide it by the total cash you spent to get in. That cash includes your down payment, your closing costs, and any money you spent before the first tenant moved in.

It is different from cap rate. Cap rate pretends you paid all cash, so it ignores the mortgage. Cash-on-cash includes the mortgage, which is why it is the number most Canadian buy-and-hold investors actually live on. A property can show a healthy cap rate and still hand you a weak cash-on-cash return once a Canadian mortgage at today's rates is on it.

Why the number is often low in Canada

In Toronto and Vancouver, many investors knowingly accept a low or even negative cash-on-cash return because they are buying for appreciation. As one Vancouver investor put it on BiggerPockets, the coast is "a cashflow negative market, but very high appreciation." That can work, but it is a bet. Another investor in the same thread was blunt: "Negative cash flow is never an option. Banking on appreciation is gambling." Cash-on-cash is the number that shows you which bet you are making, in writing, before you sign.

What to get right before you trust it

Use a real mortgage payment, not a guess. Run your rate and amortisation, including a 40-year path if you qualify for CMHC MLI Select.
Include every operating cost. Property tax at the city's real mill rate, insurance, maintenance, management, and a vacancy reserve. A St Catharines operator told a forum he uses 5 to 7% vacancy because his real rate runs higher than the CMHC average.
Count all of your closing costs: land transfer tax (and the municipal one if you buy in Toronto), legal fees, inspection, and any immediate repairs.

Cash-on-cash questions

What is a good cash-on-cash return in Canada?

There is no single number, but many investors look for 4 to 8% on a long-term rental outside the priciest markets. In Toronto and Vancouver it is often lower because buyers are paying for appreciation.

Does cash-on-cash include my mortgage?

Yes. That is the main difference from cap rate. Cash-on-cash uses your actual cash flow after the mortgage payment.

Should I count principal paydown?

No, not in the basic cash-on-cash figure. Principal paydown is a real return, but it is not cash in your pocket this year. BrickROI shows it as a separate line in the full analysis.