The net amount of money moving in and out of a rental property each month after all expenses are paid. Positive cash flow means your rental income exceeds your costs (mortgage, taxes, insurance, maintenance, management fees). Negative cash flow means you're subsidizing the property out of pocket each month. It's the fundamental metric of rental property performance.
Why It Matters
Positive cash flow is the goal for most rental property investors -- it means your tenants are covering your costs and then some. In the GTA, achieving positive cash flow on a newly purchased property is increasingly difficult given high prices and interest rates. Run the numbers honestly before buying, and don't count on appreciation alone to bail you out.
Real-World Example
You purchase a two-bedroom condo at Yonge and Finch for $620,000 with 20% down ($124,000). Your monthly mortgage payment is $2,850, property tax is $250, maintenance fees are $550, and insurance is $50. Total monthly costs are $3,700. You rent the unit for $2,800 per month. Your monthly cash flow is negative $900, meaning you are subsidizing the property out of pocket every month. To break even, you would need rents to increase by roughly 30% or you would need to have put substantially more cash down.
Ontario & GTA Context
Achieving positive cash flow on a newly purchased GTA investment property has become increasingly challenging with higher interest rates and elevated property prices. Many Toronto-area investors accept negative cash flow in the short term, banking on appreciation and mortgage principal paydown to build wealth over time. Ontario's rent control rules limit annual rent increases on occupied units to the provincial guideline (typically 2% to 3%), which can further constrain cash flow growth on existing tenancies.
How It Works in Practice
Run a detailed cash flow analysis before purchasing any investment property. Include all expenses: mortgage, property tax, insurance, maintenance fees, property management, vacancy allowance (typically 4% to 8% of rent), and a repair reserve. Be conservative with rent projections and honest about the numbers. Negative cash flow is not inherently bad if you can sustain it, but know your break-even point.
Common Questions
Is it normal to have negative cash flow on a rental in Toronto?▾
How do I improve cash flow on a rental property?▾
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