Investment Property Analysis
Underwrite income-producing properties like a professional — from quick-screen ratios to full pro-forma analysis and CMHC MLI Select financing. Every metric explained in plain English.
Total rent from all units combined
The 1% rule is a quick filter, not a final answer. It originated in US markets and works better in lower-cost cities. In expensive Canadian markets (Toronto, Vancouver), most properties don't pass the 1% rule — they may still be good investments due to appreciation. Use this to quickly eliminate obviously poor deals, then run a full cash flow analysis on properties that pass. The 2% rule is extremely rare in Canada outside of small cities.
Total rent × 12 months
Typical: 3–8%. Applies to gross rent.
Taxes, insurance, utilities, maintenance (exclude mortgage)
Cap Rate = NOI ÷ Purchase Price. A higher cap rate = more income per dollar spent, but often implies more risk or lower quality location. In Canada (2024–2025): Toronto/Vancouver multi-family: 3.5–5%. Secondary cities (Calgary, Ottawa): 4.5–6%. Smaller markets: 6–9%. Lower cap rates mean the market expects appreciation to compensate. Banks typically want a cap rate above 5% for conventional financing, and above 4% for CMHC MLI Select.
Monthly rent × 12 (before vacancy/expenses)
GRM tells you how many years of gross rent equal the purchase price. Lower is better. Typical Canadian GRM ranges: Excellent (≤8): Rare, strong cash flow. Good (8–12): Solid deal. Fair (12–15): Below-average income. Expensive (15+): Appreciation play only. Use GRM to quickly compare properties in the same market — it won't tell you if a deal pencils out financially, but it will tell you if it's overpriced relative to income.
Net Operating Income (after all expenses, before debt service)
Total annual mortgage payments (principal + interest)
Down payment + closing costs + any renovations
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested. It's your actual yield on invested cash. Target benchmarks: Below 4%: Weak — likely an appreciation play. 4–7%: Acceptable in high-cost markets. 7–10%: Good. 10%+: Excellent. Compare against alternatives: the TSX has historically returned ~7%, risk-free GICs currently ~4.5–5%. If your CoC is below GIC rates, you're not being compensated for landlord risk.
Net Operating Income (after all operating expenses)
Total annual mortgage P&I payments
CMHC MLI Select (100 pts, 95% LTV): DSCR ≥ 1.10
CMHC MLI Select (70 pts, 85% LTV): DSCR ≥ 1.15
CMHC MLI Select (50 pts, 80% LTV): DSCR ≥ 1.20
CMHC MLI Standard (75% LTV): DSCR ≥ 1.25
Conventional lenders: DSCR ≥ 1.25
Conservative underwriting: DSCR ≥ 1.40
A DSCR of 1.25 means the property generates 25% more income than needed to cover debt. Below 1.0 = the property loses money each month after mortgage payments.
Net Operating Income (after all operating expenses)
Use the prevailing cap rate in your market for comparable properties
If the seller is asking $1.5M but the market cap rate is 5.5%, and the property's actual NOI is $70,000, the income approach values it at $1.27M — giving you leverage to negotiate. Conversely, if you can raise NOI by improving rents or reducing expenses, you directly increase the property's value. Adding $10,000/year of NOI at a 5.5% cap rate adds $182,000 to the property's value — this is the power of value-add investing.
Down payment + closing costs
NOI minus annual mortgage payments (can be negative)
Historical Canadian avg: 3–5%
Cash Flow: Annual NOI minus mortgage P&I. The most visible return — what hits your bank account each month.
Appreciation: Property value growth over time. In Canada, this has historically been 3–7% depending on the market. It's unrealized until you sell.
Principal Paydown: Each mortgage payment reduces your loan balance — your tenants are paying down your mortgage. Over 25 years this can be substantial.
Many properties that appear cash-flow neutral or even slightly negative are still excellent investments when appreciation and principal paydown are included in the total return.
Property & Financing
Income
Operating Expenses
A pro-forma is a projected income statement for a property. It starts with Gross Potential Revenue (GPR) — the income if every unit is rented 100% of the time. Subtract Vacancy Loss to get Effective Gross Income (EGI). Subtract all Operating Expenses to get Net Operating Income (NOI). Subtract Debt Service (mortgage payments) to get Cash Flow Before Tax.
NOI is the most important line — it's what determines the property's value. Lenders underwrite based on NOI, not cash flow.
Net Operating Income (after all expenses, before debt)
Minimum 5 units required for MLI Select
Will be capped at each program's max LTV
MLI Select uses a points-based system. Points are earned through commitments to:
Affordability: Keeping a portion of units below market rent
Energy Efficiency: Building to a minimum energy efficiency standard (e.g., EnerGuide 86+ or Step Code 4+)
Accessibility: Meeting CSA B651 accessibility standards
Programs:
• Standard (0 pts): 75% LTV, 25yr amort, DSCR ≥ 1.25
• 50 Points: 80% LTV, 35yr amort, DSCR ≥ 1.20
• 70 Points: 85% LTV, 40yr amort, DSCR ≥ 1.15
• 100 Points: 95% LTV, 45yr amort, DSCR ≥ 1.10
The longer amortization and higher LTV dramatically improve cash flow and reduce the down payment required.
Calculator Disclaimer: These calculators provide estimates for educational purposes only. Results are approximate and should not be relied upon for financial decisions. Actual rates, payments, taxes, cap rates, and returns may differ based on your specific circumstances. Canadian mortgage calculations use semi-annual compounding as required by the Interest Act. Always consult a licensed mortgage broker, financial advisor, or real estate professional for accurate figures.