My situation
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- Where
- Home price$
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Rental property: making or losing money each month?
See a rental's monthly cash flow, true cost after principal, and break-even rent before you buy. (Most new Toronto condo investors are cash-flow negative.)
Monthly cash flow
−$1,537
- Rent collected (after vacancy)$2,400
- Mortgage paymentAbout $602 of it is principal$2,897
- Condo fees, tax, insurance, maintenance$1,040
- True cost after principalPrincipal is money saved into the property; this line is what's actually spent−$935
- Break-even rent$4,101
- Net rental yieldBefore financing, on the price2.51%
- Rent a lender usually counts as incomeOften 50% of rent (50%-80% depending on lender)$1,250
Four numbers investors care about
- Cash you put in up frontDown payment + closing costs (rough 1.5% of price)$139,750
- Cash-on-cash return (per year)Annual cash flow ÷ cash in; excludes price changes and principal paid-13.2%
- Down payment to break evenEverything else the same, cash flow exactly 0$405,921 (62%)
- Debt service coverage (DSCR)Rent after other costs ÷ mortgage payment; rental lenders often want about 1.1–1.2+, varies0.47
To lose less each month: a longer amortization, a bigger down payment, a lower rate, or a unit type with better rent.
Estimate: excludes taxes (rental income is taxable; interest etc. is deductible), price changes and transaction costs. Rental mortgage rules are up to the lender.