How Canadian Rental Yield Is Calculated

Summary

Rental yield measures the annual return from a Canadian investment property as a percentage of its value. Gross yield is total rent divided by property price. Net yield deducts operating costs including property tax, insurance, maintenance, vacancy, and property management. Canadian rental yields typically range from 3% to 6% gross, with higher yields in Atlantic Canada and the Prairies and lower yields in Toronto and Vancouver.

How it works

Gross yield vs net yield

Gross yield (%) = (Monthly rent x 12 / Property price) x 100

Net yield (%) = ((Annual rent - Annual costs) / Property price) x 100

Canadian landlord costs

Provincial considerations

Property tax rates vary significantly by province:

• Ontario: 0.60% - 1.10% of assessed value
• British Columbia: 0.25% - 0.50% (lowest in Canada)
• Alberta: 0.70% - 1.10% (no provincial sales tax helps cash flow)
• Atlantic Canada: 1.00% - 1.50% (higher rates but lower property prices)

Capital gains on sale

When selling a Canadian investment property, 50% of the capital gain is added to your taxable income. The principal residence exemption does not apply to rental properties. This makes net yield (the ongoing cash flow return) especially important since the after-tax capital gain may be lower than expected.

Worked example

C$500,000 property in Ontario, C$2,200/month rent, 20% down payment:

1. Annual rent: C$2,200 x 12 = C$26,400
2. Gross yield: (C$26,400 / C$500,000) x 100 = 5.28%
3. Property tax (0.80%): C$500,000 x 0.008 = C$4,000
4. Insurance: C$1,800
5. Property management (10%): C$26,400 x 0.10 = C$2,640
6. Maintenance (1%): C$500,000 x 0.01 = C$5,000
7. Vacancy (4%): C$26,400 x 0.04 = C$1,056
8. Total costs: C$4,000 + C$1,800 + C$2,640 + C$5,000 + C$1,056 = C$14,496
9. Net yield: ((C$26,400 - C$14,496) / C$500,000) x 100 = 2.38%
10. Annual cash flow: C$26,400 - C$14,496 = C$11,904 (C$992/month)
11. ROI on deposit: (C$11,904 / C$100,000) x 100 = 11.90%

Key differences from other markets

• Property taxes are substantially higher in Canada than in the UK (where council tax is flat and relatively modest). Canadian property tax at 0.5%-1.5% of assessed value meaningfully reduces net yield compared to UK buy-to-let properties.
• No equivalent of the UK’s Section 24 mortgage interest restriction. Canadian landlords can still fully deduct mortgage interest as a business expense against rental income, making leveraged rental investment more tax-efficient than in the UK.