Maybe a better way to phrase the point is not to discount the real costs of owning rental real estate. In your monthly cash flow / return figures, how are you accounting for repainting, redoing flooring, replacing windows, replacing cabinetry and countertops, roofing, driveway repair, landscaping and fencing, furnace and HWT, and so on. Also, vacancy cost and other forms of lost rent (stubborn bad tenant stuff).
I see what you mean now. The way I currently have been tracking these is realizing them as an expense. I am lucky to have purchased homes where most of the big ticket items have been taken care of and should be good for a long time. The smaller stuff like repairs/paint/vacancies I count as an expense against the rent collected and yes I should add that cost into my return calculation. In my budget I assume 80% vacancy and track the dollar amount as an expense and then realize an increased income if I do not have a vacancy during the year. Although this is probably too conservative as our area has hovered around 2-3% for 15+ years.
Yes, the way you are accounting for these costs is quite common with amateur landlords. The problem is that it distorts the real investment return picture over the long term. It also has drastically inflated the valuations of rental property because so many people are being drawn into the landlord game based on flawed math.
For example, if you own a property worth $250,000 and collect $1,500 a month in rent, I see lots of people quickly say their property has a 7.2% yield. Then they'll say that there's a $200,000 mortgage with a $5,000 annual interest expense, so their yield on their equity is 26%. And that does a quick leap to say that there is no other investment that can give a 26% yield plus capital gains over time. Therefore landlording is awesome. (Not saying this is you exactly, I realize you are at least figuring taxes, vacancy, and some other costs).
However, the more correct way to look at it is calculating the true cost of the depreciation of each component of the property in real time. Even if the house is new or recently renovated, the costs are still very real even if the cash might not be out tomorrow. So on the same example property, the following is much more realistic and the costs are probably still understated:
House: $250,000
Mortgage: $200,000 @ 2.5%
Equity: $50,000
Rental Income: $1,500
Interest Expense: $417
Property Tax: $180
Insurance: $150
Municipal Utilities: $75
Paint (5 yr life): $20
HWT (10 yr life): $5
Floor (15 yr life): $50
Furnace (20 yr life): $18
Cabinet/Counters (30 yr life): $40
Light/Plumbing Fixtures (30 yr life): $8
Deck/Fence/Landscape/Driveway: $50
Siding (30 yr life): $25
Windows & Doors (30 yr life): $35
Ancillary Damage (pests/mold/cleaning/water): $50
Vacancy Cost 5%: $75
TOTAL Expense: $1,198
NET INCOME: $302 or 1.45% yield on assets or 7.25% yield on equity
Now that number doesn't include investment/income taxes, real agent fees, lawyer fees, purchase/sale taxes, increased interest potential, and probably a bunch of other stuff I'm not thinking about off the top of my head.
I'm suggesting you take a good look at each of your rental properties and get a true idea of your real returns. Sell your worst ones and keep the best one or two if you really are determined to be a landlord. Looking at your financial picture in your CS, you are very highly leveraged and probably dangerously so. I think your whole plan is based on one hope: that your local property market explodes upwards in value. Adding more leverage to invest, whether that's your RRSP, or borrowing to improve rental properties, or buying naked options is not a sound, broadly diversified, likely to succeed strategy.