Rent vs Buy — Investor Edition (Canada)

Why this page can't hand you a cap rate or return assumption

A fair rent-vs-invest comparison needs an honest appreciation assumption and an honest alternative-return assumption, and this registry could not verify a current, citable Canadian cap-rate or total-return series to supply either one. The one candidate source found for city-level cap rates returned a Cloudflare block on every fetch attempt this session, so no per-city or national cap-rate figure from it can be published here as a sourced fact. If you've seen a specific cap-rate percentage quoted elsewhere for your market, verify it against a source you can actually open before treating it as ground truth — don't let this page's absence of a number substitute for your own confirmation.

What you can ground your rent input in is CMHC's own survey data. CMHC's October 2025 Rental Market Survey for Toronto shows average purpose-built rent rising from C$1,850 to C$1,913 year-over-year (3.4%), while vacancy rose from 2.5% to 3.0% over the same period — rents still climbing, but against loosening supply. Statistics Canada's asking-versus-paid rent series adds a second data point: Toronto's Q2 2026 average asking rent for a 2-bedroom (C$2,650) ran well above the average paid rent on existing leases (C$2,160) — a reminder that your rent-growth assumption should be anchored to achievable turnover rent, not the highest asking price in the neighbourhood.

The financing constraint behind the down payment

Why does a Canadian rental typically need 20% down rather than the 5% an owner-occupied purchase allows? Under OSFI's Guideline B-20, high-ratio mortgages — loan-to-value above 80% — must be insured, and CMHC's homeownership insurance program is built for owner-occupied purchases, not pure investment properties. That combination pushes a straight rental purchase to a conventional, uninsured structure at 80% LTV or lower, which is the practical origin of the 20% minimum this comparison assumes.

That uninsured mortgage then has to clear OSFI's minimum qualifying rate: the greater of your contract rate plus 2%, or a 5.25% floor. That's the rate a lender tests your application against, and it's worth running your own debt-service math at that stress-tested rate — separately from the contract rate you enter into this calculator's monthly cash-flow projection — so the "out of pocket" side of the comparison reflects what qualifying actually required, not just what you'll eventually pay.

For a sense of where actual borrowing costs sit, the Bank of Canada's own rate data shows the chartered-bank prime lending rate at 4.45% as of mid-September 2026 — each institution sets its own prime, influenced by but not identical to the Bank of Canada's policy rate. Your actual contract rate will sit at some spread to that, which is the number that determines whether the property path or the alternative-investment path shows a larger out-of-pocket contribution during the hold.

The exit: what actually gets taxed

Both paths in this comparison end with a number, and only one of them faces a specific, sourced tax treatment on exit. If you sell the property, the gain is a capital gain (assuming you're not caught by the 365-day property flipping rule), and the government confirmed the capital gains inclusion rate remains at one-half rather than rising to two-thirds as previously proposed — so only half of your gain is added to taxable income. But if you claimed capital cost allowance on the building during the hold, CRA's rental income guide requires that CCA to be added back to income as a recapture (if proceeds exceed the building's remaining undepreciated capital cost) before the capital-gains treatment applies to what's left — a real, separately-taxed cost of the deductions you took along the way, and one this calculator's pre-tax figures don't model.

What CCA actually does to your cash flow during the hold, not just at exit

The exit-tax section above covers CCA recapture on sale, but the deduction only helps you during the hold if you understand how CRA lets you claim it. Most rental buildings fall into CCA Class 1, depreciated at a 4% declining-balance rate — a small annual deduction against rental income relative to the building's value, not the accelerated write-off some investors assume. In the year you acquire the property, the half-year rule limits your first CCA claim to half of that 4%, so year one shelters even less income than year two onward. And CCA works the other way at a loss, too: if you sell for less than the building's remaining undepreciated capital cost, CRA has you deduct a terminal loss from income rather than add a recapture — the mirror case to the recapture math already covered, worth knowing if your exit scenario is a downturn rather than a gain.