Cash-on-cash return calculator

A worked Canadian rental example

The illustrative defaults commit $160,000: $130,000 down payment, $15,000 cash-paid closing costs, $5,000 renovations and $10,000 reserves. Scheduled rent of $3,500 per month becomes $39,900 a year after 5% vacancy. Deduct $9,000 operating expenses, $28,800 mortgage payments and $1,200 replacement reserves. That leaves $900 a year, or $75 per month, and a 0.56% cash-on-cash return. These are assumptions, not market benchmarks or a mortgage quote.

Cash-on-cash is not cap rate or total return

Cash-on-cash divides annual distributable cash flow by initial cash committed. It includes full mortgage payments, including principal. Cap rate instead compares NOI before financing with property value. Total investment return can also include appreciation and equity gained through principal repayment; neither is spendable rental cash and neither enters this result.

Use a consistent reserve convention

This calculator includes the initial reserve in invested cash and deducts ongoing replacement allocations after NOI. Do not put the same allocation in operating expenses too. A different reserve convention produces a different percentage, so compare properties on the same basis. Enter your actual debt service rather than assuming a Canadian lender will offer a particular rate or down payment.

A negative return means the property needs a cash top-up under these assumptions. A zero initial investment has no meaningful cash-on-cash percentage. Income tax and capital cost allowance are not modelled. For renewal and longer-term equity scenarios, use the full Canadian investment calculator.