Cap Rate Calculator Canada

What counts in NOI — and what the 50% rule assumes

This calculator has two modes, read directly from its own code. In 50% rule mode it sets operating expenses to exactly half of annual gross rent and NOI to the other half — it does not separately subtract vacancy, because that would double-count against the 50% assumption. In manual mode, it first removes your entered vacancy percentage from gross rent, then subtracts the operating expenses you type in. Either way, NOI never includes the mortgage payment or income tax — that is the definition of cap rate, and it is also why cap rate alone cannot tell you whether a deal cash flows once you finance it.

The 50% rule is a rough industry shortcut, not a Canada Revenue Agency formula. CRA's own guidance on deductible rental expenses lists mortgage interest (but never principal), property tax, insurance, maintenance and repairs, property management fees, advertising, legal and accounting fees, and capital cost allowance (CCA) as the categories a landlord can actually claim against rental income. None of those percentages sum to a fixed 50% of rent in any general way — a 1950s Toronto walk-up with aging mechanicals and a 2024 Calgary infill with a warranty carry very different real operating-cost ratios. If you have even rough numbers for property tax, insurance, and condo or association fees, switching to manual mode and entering them will move the cap rate closer to reality than the 50% shortcut will.

Rising vacancy is loosening the rent side of the equation

NOI is only as good as the rent figure behind it, and CMHC's October 2025 Rental Market Survey shows vacancy climbing in several major purpose-built apartment markets — which is exactly the condition under which achievable rent growth slows and a cap rate calculated on last year's asking rent starts to overstate this year's NOI. Toronto CMA's total vacancy rate rose from 2.5% to 3.0% between October 2024 and October 2025, while average rent moved from C$1,850 to C$1,913. Vancouver CMA moved further — from 1.6% to 3.7% vacancy, with average rent rising from C$1,924 to C$1,963. Calgary CMA's vacancy edged from 4.8% to 5.0% (rent C$1,732 → C$1,761), and Halifax CMA rose from 2.1% to 2.7% (rent C$1,629 → C$1,745).

Every one of these markets still shows rent rising year over year, but the vacancy rate is rising alongside it in every case — a combination that historically precedes softer rent growth, not faster. If you're plugging in a rent figure from a listing you saw six months ago, or from a friend's building, re-check it against a current comparable before trusting the cap rate this calculator returns.

Asking rent overstates what a cap rate should really use

Statistics Canada's experimental rent-price series separates what landlords advertise from what tenants actually pay, and the gap is material everywhere it's measured. In Q2 2026 (April 2026 reference month), Toronto's average asking rent for a two-bedroom apartment was C$2,650 versus an average paid rent of C$2,160 — a difference of nearly C$500/month on the exact rent figure that becomes the numerator of every NOI calculation. Vancouver showed a similar gap (C$3,030 asking vs. C$2,470 paid), and even Calgary — where average paid rent slightly exceeds average asking rent at C$1,930 vs. C$1,890 — shows the two figures diverge in either direction depending on the market.

StatCan itself labels this an experimental series, so treat it as a directional check rather than a precise substitute for a local comparable. But the direction is consistent enough to matter: if the monthly rent you enter into this calculator came from a listing site rather than an actual signed lease at a comparable unit, your NOI — and therefore your cap rate — is probably inflated, sometimes by 15–20%.

Cap rate ignores financing on purpose

Cap rate deliberately excludes the mortgage so you can compare properties independent of how any one buyer chooses to finance them. But once you do finance a purchase, the rate you actually qualify at matters, and it usually isn't the rate on the lender's rate sheet. For an uninsured mortgage — which any purchase with 20% or more down falls into — federal banking regulator OSFI requires lenders to qualify the borrower at the greater of the contract rate plus 2 percentage points, or a 5.25% floor. That qualifying rate has no effect on the cap rate this calculator returns, but it directly determines whether the financed deal will carry itself — which is a separate, and for most buyers more decisive, question.

If you want to see the property's return after debt service, run the same numbers through cash-on-cash return or the full rental property calculator, both of which subtract an actual mortgage payment from income before computing a return.

CCA: the other line item NOI leaves out

Capital cost allowance — the CRA's version of depreciation — never appears in a cap rate calculation, but it's worth understanding before you rely on NOI as a proxy for after-tax cash flow. CRA's rental-income guide places most rental buildings in Class 1 (a 4% declining-balance rate), or Classes 3, 6, 31, or 32 depending on construction material and acquisition date, while furniture, appliances, and other rental property outside the building itself usually falls in Class 8, at 20%. In the year you first claim CCA on a class, the half-year rule limits the claim to one-half of your net additions to that class — so a full year's 4% rate effectively becomes 2% in year one. And on disposal, CRA requires you to either add a recapture of CCA to income, or deduct a terminal loss, depending on whether the sale price is above or below the property's remaining undepreciated capital cost. None of that touches the NOI or cap rate this calculator shows you — CCA is a tax-return concept, not an operating-income one — but it's the reason a strong cap rate and a strong after-tax return aren't the same claim.

Two more markets, the same vacancy-up-rent-up pattern

The four CMAs above aren't the whole national picture. CMHC's Montréal Rental Market Survey data shows total vacancy rising from 2.1% to 2.9% between October 2024 and October 2025, with average rent up from C$1,167 to C$1,290 — a market where rent still moved sharply even as more units sat empty. Ottawa's CMHC data shows vacancy up from 2.6% to 3.0% over the same period, with rent rising from C$1,673 to C$1,727. Neither city breaks the pattern from the table above: every major CMHC-surveyed market this registry checked showed vacancy rising alongside rent in the October 2024-to-2025 window, not falling as rent rose. That's a national-level caution, not just a Toronto or Vancouver one — whichever city you're pricing a cap rate for, check whether its most recent CMHC vacancy figure moved in the same direction as its rent before trusting last year's NOI to hold this year.