Rental property return metrics.
Gross yield
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Net yield
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Cash-on-cash
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Annual cash flow
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Your breakdown
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Three return numbers that answer different questions
A rental property has no single return. This calculator reports three, because each one answers something distinct. Gross yield measures the rent against the purchase price and tells you how the property compares to others on a like for like basis. Net yield strips out operating expenses to show the unlevered earning power of the asset. Cash on cash measures the actual cash flow against the cash you put down, which is the figure that matters once a mortgage enters the picture. Read together they tell you whether a deal is fairly priced, genuinely profitable, and worth your capital.
How each metric is built
Gross yield is annual rent divided by price. Net operating income, often shortened to NOI, is annual rent minus operating expenses, and net yield is that NOI divided by price. Crucially, NOI excludes the mortgage, because it measures the property itself rather than how you financed it. Annual cash flow then subtracts the full mortgage payment from NOI, and cash on cash divides that cash flow by your down payment. The mortgage payment in this tool is the whole thing, principal and interest, so the cash flow figure reflects money actually moving in and out of your account.
A $400,000 condo, financed
Consider a $400,000 condo bought with $100,000 down, renting for $2,600 a month, with $7,000 of annual operating expenses and an $18,000 yearly mortgage payment.
The leverage is doing useful work here. A 6.05 percent net yield on the whole property becomes a 6.20 percent cash on cash return on your $100,000 stake, because the mortgage lets you control a $400,000 asset with a quarter of the cash.
What the return figures quietly omit
Three things this calculator does not capture deserve a mention before you commit capital. First, it ignores income tax, and your cash flow is taxed at your marginal rate, so the after tax return is lower than the cash on cash shown. Second, it leaves out appreciation and the slow build of equity as your mortgage principal is repaid, both of which are real returns that simply do not show up in annual cash flow. Third, it assumes you actually collect twelve months of rent. Vacancy, a bad tenant, or a special assessment on a condo can turn a positive cash flow negative in a single year. A disciplined investor pads the expense figure for a vacancy allowance and a repair reserve rather than modelling a perfect year.
Who this is for and a benchmark
This tool is for prospective buyers screening listings and for current owners checking whether a property still earns its keep. My rule of thumb for Canadian rentals: a gross yield around 5 to 8 percent is normal, net yield landing near 3 to 5 percent is healthy, and a cash on cash return in the 8 to 12 percent range is strong once leverage is applied. In expensive markets like Vancouver and Toronto, many properties run a negative cash flow and rely entirely on appreciation, which is a speculative bet rather than an income investment. If the cash on cash number is negative, be honest that you are buying for price growth, not yield, and size that risk accordingly.
Why does cash on cash beat the net yield here?
Because of leverage. Net yield measures return on the full $400,000 value, while cash on cash measures return on only the $100,000 you actually invested. As long as the property earns more than the cost of the borrowed money, the mortgage amplifies the return on your own cash. The flip side is that leverage cuts both ways: if the property underperforms or rates rise, the same mechanism magnifies your losses against that smaller equity base.
Should I include the mortgage in net yield?
No, and that is deliberate. Net yield is designed to measure the property’s own earning power independent of financing, so two buyers comparing the same building get the same net yield regardless of their down payments. Financing belongs in the cash flow and cash on cash figures instead. Keeping the mortgage out of net yield is what lets you compare an all cash purchase against a heavily financed one on equal footing.