Investment Property Cashflow Analysis: The Real Numbers
I've helped dozens of investors build portfolios in the GTA. Here's how I analyze cashflow and ROI—and what most investors get wrong.
From Savie Wander
Real estate investment isn't just about buying property—it's about understanding the numbers. I've seen investors make costly mistakes by focusing on the wrong metrics. Let me share what I've learned analyzing hundreds of investment properties across Oakville, Burlington, Mississauga, and the broader GTA.
What Is Cashflow, Really?
Cashflow is simple: money in minus money out. But here's what most investors miss—they calculate it wrong from day one.
Monthly Cashflow Formula
Cashflow = Rental Income - All Expenses
Seems simple, right? But "all expenses" is where investors trip up. Let me break down what that actually means.
Money Coming In
- •Monthly rent: The obvious one, but use realistic market rent, not what you hope to get
- •Parking fees: If you can charge separately
- •Storage fees: If applicable
- •Laundry income: For multi-unit properties
Pro tip: Always use conservative rent estimates. I've seen investors use "optimistic" numbers and end up cashflow negative. Use 90-95% of market rent to account for vacancies and rent discounts.
Money Going Out (The Complete List)
- •Mortgage payment: Principal + interest
- •Property taxes: Varies by municipality
- •Insurance: Landlord insurance (higher than owner-occupied)
- •Property management: 8-12% of rent (if you use a manager)
- •Maintenance & repairs: Budget 1-2% of property value annually
- •Vacancy allowance: 5-10% of annual rent
- •Utilities: If you pay (varies by property type)
- •Landscaping/snow removal: If applicable
- •Legal/accounting: Annual costs
Real Example: A $650,000 Investment Property
Let me walk you through an actual analysis I did for a client last year—a 3-bedroom townhouse in Mississauga:
Monthly Income
Monthly Expenses
Monthly Cashflow
-$1,173
Cash-on-Cash Return
-11.2%
Wait—This Looks Bad!
You're right—this property is cashflow negative. But here's what many investors miss: cashflow isn't everything.
This property still builds equity through principal paydown (~$600/month) and potential appreciation. In the GTA, many investors accept negative cashflow for the first few years, betting on long-term appreciation. But you need to be able to afford that negative cashflow.
Key Metrics Every Investor Should Know
1. Cash-on-Cash Return
This is your annual cashflow divided by your initial investment (down payment + closing costs).
What's good? In the GTA, 4-8% is considered solid. Many properties are lower (or negative) because investors are betting on appreciation.
2. Cap Rate (Capitalization Rate)
This shows your return if you paid cash (no mortgage). It's useful for comparing properties.
What's good? In the GTA, cap rates are typically 3-6%. Lower cap rates often mean higher appreciation potential (and vice versa).
3. Total Return (The Big Picture)
This includes cashflow + principal paydown + appreciation. This is what really matters long-term.
Example: Even if cashflow is -$1,000/month, if principal paydown is $600/month and appreciation is 3% ($1,625/month), your total return is positive.
4. Debt Service Coverage Ratio (DSCR)
Lenders use this to see if rental income covers mortgage payments.
What's good? Lenders typically want 1.2-1.5+. Below 1.0 means negative cashflow.
Common Mistakes I See Investors Make
Using "Best Case" Rent Numbers
I've seen investors use the highest rent listing they can find, then wonder why they can't achieve it. Always use conservative, realistic market rent—and account for vacancies.
Underestimating Maintenance Costs
"The property looks fine" isn't a maintenance plan. Budget 1-2% of property value annually. A $600,000 property needs $6,000-$12,000/year in maintenance. It might not happen every year, but when it does, you need to be ready.
Ignoring Vacancy Rates
Even in hot markets, properties sit vacant between tenants. Budget for 5-10% vacancy. In the GTA, turnover can happen, and you need time to find the right tenant (not just any tenant).
Not Accounting for Property Management
Even if you plan to self-manage initially, factor in management costs. You might want to use a manager later, or you might need one if you move or get busy. Budget 8-12% of rent.
Focusing Only on Cashflow
Cashflow matters, but it's not everything. In the GTA, many successful investors accept negative cashflow for appreciation potential. But you need to understand total return, not just monthly cashflow.
GTA Investment Market Insights
The GTA market has unique characteristics that affect investment analysis:
- →High property values: This means larger down payments and often lower cash-on-cash returns, but historically strong appreciation.
- →Strong rental demand: Low vacancy rates mean consistent rental income, but also higher property prices.
- →Location matters: Oakville vs Mississauga vs Burlington—each has different dynamics. I analyze each area specifically with my investor clients.
- →Rent control: Ontario's rent control affects long-term projections. Factor in maximum allowable increases.
- →Appreciation potential: The GTA has seen strong long-term appreciation, which is why many investors accept lower (or negative) cashflow.
How I Analyze Investment Properties
When investors come to me, here's my process:
- Verify market rent: I pull comparable rentals in the area to get realistic rent expectations, not just listing prices.
- Calculate all expenses: We go through every single cost—nothing gets missed.
- Run multiple scenarios: Best case, worst case, and realistic case. What if rent is 10% lower? What if maintenance is higher?
- Calculate all metrics: Cashflow, cash-on-cash, cap rate, total return, DSCR.
- Consider your goals: Are you looking for cashflow, appreciation, or both? This affects which properties make sense.
- Review financing options: Different down payment amounts and mortgage terms affect cashflow significantly.
I don't just show you numbers—I help you understand what they mean for your specific situation and goals.
Ready to Analyze Your Investment Property?
Let's sit down and run through the real numbers together. I'll help you understand cashflow, ROI, and whether a property makes sense for your investment goals.