Real Estate

Cashflow on Rental

  • Last Updated:
  • Feb 4th, 2021 9:16 am
[OP]
Jr. Member
Jul 31, 2018
108 posts
25 upvotes

Cashflow on Rental

Hello my husband and I live in Toronto two story house, and we rent out our basement. Basement constitutes 1/3 of the property. How do we calculate if we are in the cash flow positive or negative while renting the basement. Here are the monthly income/expenses:

Income
Rent: 1000

Expenses
Electricity: 300
Gas: 150
Water: 110
Internet: 60
Home Insurance: 120
Property Tax: 6000
Maintenance: 50 (estimate)

Mortgage
Interest: 1050

Is it worth continue to rent out, how much cash flow per month are we getting from it?
Last edited by maxineli on Feb 1st, 2021 11:16 pm, edited 1 time in total.
6 replies
Deal Fanatic
Feb 22, 2011
9549 posts
11747 upvotes
Toronto
You are missing property tax and an estimate for maintenance but it's pretty clear from what you have provided that the rent is covering way more than 1/3 the expenses. Also for mortgage you would only include the portion that is interest not the full payment.
Deal Addict
Mar 2, 2017
1100 posts
2010 upvotes
Toronto
Yes you are cashflow positive from a very basic calc if you take 1/3rd of those expenses on a monthly basis, your rent pays them with $250/month positive cashflow.

Your maintenance on a home is grossly understated FYI.
Realtor, Investor, CPA
Jr. Member
User avatar
Aug 11, 2019
175 posts
183 upvotes
Toronto
There are a couple ways to look at this.
On an annual basis you have $12,000 more in cash than you would have, if you weren't renting out the basement. (But not just quite)

Taking 1/3rd of all your home expenses, won't be accurate to the calculation as if you weren't renting out your basement you would still have certain expenses.

The expenses we can't take into consideration is the Property Tax, Mortgage Interest, internet and home insurance. - Fixed costs that aren't tiered to whether the basement was rented or not.

The remaining expenses of Electricity, Gas, Water are variable expenses, are completely tiered to the basement being rented. And we can take a 1/3rd of the expenses for our calculation.
($300 + $150 + $110 = $560) x .33
=$184.80

Yeah, believe or not you are actually cash flowing $815.20/Monthly ($9,782.4 annually)

This is how I would calculate it, the CRA might calculate it completely different though....

The real question is, what would you prefer? An extra $9,782 each year or your basement to roam around in! Best of luck!
Full Time Realtor
GTA & Surrounding Areas
Newbie
May 19, 2006
43 posts
54 upvotes
Agree with the above. Its almost ALL positive cashflow as only the variable expenses should be considered. The only other expense would be income taxes.

"If its worth it?" would matter more on whether you would like an empty basement more than having a renter and ~$10,000 in your pocket.
Sr. Member
Feb 23, 2005
900 posts
35 upvotes
There is a difference between net income and cash flow positive

Net income = Income less expenses less income taxes
Cash flow = Income less expenses less income taxes less principal portion of mortgage as well

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