Methodology
How DealLens calculates
Every number DealLens shows is computed by fixed formulas from the inputs you enter — no AI is involved in the maths. The AI report only explains those numbers; it is instructed not to invent facts about the property or the market. Results are estimates for screening deals, not financial advice or a guarantee of returns.
Monthly cash flow
Effective rent = rent × (1 − vacancy)
Operating costs = tax/12 + insurance/12 + condo or HOA fees + other costs + management% × effective rent + repair reserve% × rent
Cash flow = effective rent − operating costs − mortgage payment
Net operating income, cap rate, DSCR
NOI (yearly) = (effective rent − operating costs) × 12 — before the mortgage
Cap rate = NOI ÷ purchase price
DSCR = NOI ÷ yearly mortgage payments (blank for an all-cash purchase)
DSCR above 1 means the property's income covers its debt; many lenders look for 1.20–1.25 or more.
Cash-on-cash return
Cash invested = down payment + closing costs + rehab budget
Cash-on-cash = yearly cash flow ÷ cash invested
Mortgage payment: Canada vs the US
Payment = loan × i × (1 + i)^n ÷ ((1 + i)^n − 1), with n = months of amortization
- Canada: fixed-rate mortgages compound semi-annually, so the monthly rate is i = (1 + rate/2)^(1/6) − 1. Example: $400,000 at 5% over 25 years ≈ $2,326/month.
- United States: interest compounds monthly, i = rate/12. The same loan would be ≈ $2,338/month.
Default assumptions
The quick check fills in typical costs so you get a first answer from four numbers. Change any of them in the full analysis.
| Assumption | Canada | United States |
|---|---|---|
| Amortization | 25 years | 30 years |
| Compounding | Semi-annual | Monthly |
| Property tax / year | 0.8% of price | 1.2% of price |
| Insurance / year | 0.35% of price | 0.5% of price |
| Vacancy | 5% | 5% |
| Repairs and big-ticket savings | 10% of rent | 10% of rent |
| Closing cost estimate | Land transfer tax + ~$2,000 legal | ~3% of price |
Property tax varies widely — from roughly 0.3% to over 2% of value depending on the city. Always replace the default with the real figure from the listing or the municipality.
Land transfer tax (Canada)
The estimate applies the published brackets for Ontario (plus the Toronto municipal tax), British Columbia, Quebec and Manitoba, Alberta's land titles fee, and approximate flat rates elsewhere. It does not include first-time-buyer rebates (which don't apply to most investment purchases) or the foreign-buyer and speculation taxes. Confirm the final figure with your lawyer or notary.
The quick-check verdict
- Looks like a good deal: at least $100/month cash flow and DSCR of 1.25 or more (or an all-cash purchase).
- Proceed with caution: positive but thin cash flow, or a DSCR under 1.25.
- Looks like a bad deal: negative monthly cash flow after typical costs.
It is a preliminary screen. The full analysis replaces the defaults with your numbers and checks the deal against your own targets (minimum cash flow, cash-on-cash, DSCR, cap rate) if you set them.
Stress tests
Each scenario changes one assumption and recalculates everything:
- Rent 10% lower
- Interest rate 1 point higher (Canadian lenders qualify borrowers at a higher rate too)
- Vacancy doubled (at least 5%)
- All operating costs 10% higher
The scenario that cuts cash flow the most is shown as the biggest risk.
What the numbers don't cover
- Appreciation, principal paydown and tax effects (depreciation, capital gains)
- The property's condition, legal status, zoning, rent-control rules or tenant situation
- Whether a lender will approve the mortgage
- Current market rents or comparable sales — DealLens uses the rent you enter
Get an inspection, verify rents with local comparables and speak to a mortgage professional before you buy.
Defaults last reviewed October 2026 for Canada and United States.