Toronto investor guide
How to calculate cash flow and cap rate on a Toronto investment property
Before you buy a multiplex or a house with a rental unit, you need four numbers: net operating income, cap rate, monthly cash flow and total return. Here is how to work them out, with a real-world Toronto triplex example.
By Spiro Vrysellas, Broker, Vrysellas Team, Elevate Realty Inc., Brokerage. Updated October 2026.
The four numbers that matter
- Net operating income (NOI): yearly rent minus operating costs such as property tax, insurance, utilities you pay, maintenance and an allowance for vacancy. It does not include your mortgage.
- Cap rate: NOI divided by the purchase price. It lets you compare properties regardless of how they are financed.
- Cash flow: NOI minus your mortgage payments. This is what lands in, or leaves, your bank account each month.
- Total return: cash flow plus the mortgage principal your tenants pay down, before any change in value.
Worked example: a Toronto triplex
A $1,300,000 triplex with three rented units bringing in $8,000 a month. The buyer puts 20% down at a 4.25% rate over 30 years.
| Yearly rent | $96,000 |
| Property tax | -$9,750 |
| Insurance | -$3,600 |
| Utilities paid by the owner | -$4,800 |
| Maintenance (5% of rent) | -$4,800 |
| Vacancy allowance (3% of rent) | -$2,880 |
| Net operating income | $70,170 |
| Cap rate | 5.40% |
| Mortgage payment | $5,094 a month |
| Cash flow | About +$750 a month |
| Principal paid down in year one | About $17,650 |
| Total return in year one, before any change in value | About $26,700 |
| Cash invested (down payment, land transfer tax, legal) | About $307,450 |
Investment deals in Toronto typically have 4% to 5% cap rates in the current market. This one beats that at 5.40%. A well-bought property like this cash flows from day one, and on top of that your tenants pay down about $17,650 of the mortgage in the first year. Know your numbers before you buy so you can tell a strong deal from an average one.
Ways to improve the numbers
- Live in one unit. An owner-occupied house with a rental unit, or a duplex to fourplex, can be bought with less than 20% down, and first-time buyer land transfer tax rebates apply.
- Add a unit. Toronto allows up to four units on most residential lots, so a conversion or garden suite can raise rent faster than costs.
- Buy below market rent. Units first occupied before November 15, 2018 are rent controlled, with increases capped at 2.1% for 2026. Units first occupied after that date are not.
- Shift utilities to tenants with separate meters where the building allows it.
Frequently asked questions
What is a good cap rate in Toronto?
Investment deals in Toronto typically have 4% to 5% cap rates in the current market. Lower cap rates are common in central neighbourhoods where land values are high.
How much down payment do I need for a rental property?
At least 20% if you will not live there. If you live in one of the units of a one to four unit property, you can put down less with an insured mortgage.
Can rental income help me qualify for the mortgage?
Yes. Lenders count part of the rent toward your income or use it to offset the property's costs. How much depends on the lender.
What costs do investors forget?
Vacancy between tenants, repairs, landlord insurance, legal costs if a tenancy goes wrong and the time to manage the building. Budget for all of them from day one.
More Toronto guides
How much mortgage you can qualify for Cash to close and land transfer tax What you walk away with after sellingEstimates only. Rents, costs and rules vary by property. Speak with your accountant, lawyer and lender before you buy. This is not financial or tax advice.