Why Numbers Come Before Neighbourhoods
Most investors do this backwards. They fall in love with a neighbourhood, find a property, then try to make the numbers work. The right sequence: analyze numbers first, then decide if the neighbourhood justifies them.
1. Net Operating Income (NOI)
NOI is the annual income after operating expenses — before mortgage payments. It's the foundation of every other metric.
NOI = (Gross Annual Rent × 0.95) − Annual Operating Expenses
The 0.95 accounts for 5% vacancy. Operating expenses include property taxes, insurance, and maintenance. They do not include mortgage payments.
Many sellers advertise "gross rent" and call it income. Gross rent is not NOI. Always subtract vacancy and expenses before making decisions.
2. Cap Rate
Cap rate tells you the return independent of financing — the universal comparison metric for income properties.
Cap Rate = (NOI ÷ Purchase Price) × 100
3. Monthly Cashflow
Monthly Cashflow = (NOI ÷ 12) − Monthly Mortgage Payment
Use our Canadian mortgage calculator for accurate payments using semi-annual compounding.
Run cashflow at both 20% and 25% down. The difference often determines positive vs negative cashflow.
4. Cash-on-Cash Return
CoC Return = (Annual Cashflow ÷ Total Cash Invested) × 100
Target 6%+ cash-on-cash in Ontario's current rate environment.
5. Gross Rent Multiplier (GRM)
GRM = Purchase Price ÷ Annual Gross Rent
GRMs of 10–14 represent reasonable deals in Ontario's strongest markets. Above 18 is speculation territory.
Ontario Market Benchmarks (2026)
| Market | Avg. Cap Rate | Avg. GRM | Entry Price | Verdict |
|---|---|---|---|---|
| Windsor | 8.5–10% | 9–11 | $380K–$550K | Strong ✓ |
| Oshawa | 7.2–8.5% | 11–13 | $500K–$700K | Good ✓ |
| Kitchener-Waterloo | 7–8% | 12–14 | $550K–$750K | Good ✓ |
| Hamilton | 6.5–7.5% | 12–15 | $600K–$850K | Watch ⚠️ |
| London | 6–7% | 13–16 | $500K–$700K | Watch ⚠️ |
Run a Real Deal Right Now
Plug in any Ontario duplex listing and get cap rate, cashflow, NOI in seconds.
Open the CalculatorFull Worked Example — Hamilton Duplex
Hamilton duplex listed at $699,000. Unit 1: $2,200/mo. Unit 2: $1,700/mo. Taxes: $7,200. Insurance: $2,800. Maintenance: $7,000.
| Metric | Calculation | Result |
|---|---|---|
| Gross Annual Rent | $3,900 × 12 | $46,800 |
| Vacancy (5%) | $46,800 × 0.05 | −$2,340 |
| Operating Expenses | $7,200+$2,800+$7,000 | −$17,000 |
| NOI (Annual) | $27,460 | |
| Cap Rate | $27,460 ÷ $699,000 | 3.93% |
| Monthly Cashflow | $2,288 − $3,412 | −$1,124/mo |
This deal at $699,000 doesn't work. A 3.93% cap rate below the mortgage rate means significant negative cashflow. Negotiate to ~$540,000 or pass.
Educational purposes only. Not financial advice. Always consult a licensed professional.