How to Analyze a Multiplex Deal in Canada: A Step-by-Step Guide

To analyze a multiplex, work from the income to the financing to the exit: verify rents, subtract vacancy and expenses to get NOI, compare the cap rate with the market, size the loan from DSCR, then measure returns, upside and downside. Each step depends on the one before it, so an error in the rent roll flows through to every number after it.

1. Verify the rent roll and market rents.
2. Set vacancy and operating expense assumptions.
3. Calculate net operating income (NOI).
4. Compare the cap rate and price with the market.
5. Size the mortgage with DSCR.
6. Measure cash-on-cash and total return.
7. Price the value-add and rent upside.
8. Plan the exit.
9. Stress-test the deal.

We’ll use one example throughout: an 8-unit building listed at $1,950,000, with every unit rented at $1,750 a month. Each step links to a dedicated guide if you want more depth.

Start by confirming what each unit actually rents for, then compare those rents with the market, because the rent roll is the foundation of every other number. Ask the seller for a rent roll listing each unit, its rent, lease start date, deposit and any arrears, and check it against leases and bank deposits during due diligence.

Our 8-unit building has gross potential rent of $168,000 (8 × $1,750 × 12). Add parking, laundry and storage income if there is any. Then check current listings for similar units: if market rent is $2,000, the building has upside; if it is $1,600, the current rents may not survive turnover.

A quick screen at this stage is the gross rent multiplier: price ÷ gross annual rent. Here it is $1,950,000 ÷ $168,000 = 11.6. Comparing GRMs across listings in the same area shows which buildings are priced high relative to their rent before you spend time on expenses. See the gross rent multiplier guide.

Subtract a vacancy allowance and every operating expense the owner pays, using your own estimates instead of the seller’s. Listings often show taxes and insurance but leave out management, repairs or a vacancy allowance.

Expenses here are 34% of effective gross income, or $6,990 per unit per year. Include management even if you plan to self-manage, because lenders will. For how to pick these figures, see vacancy and operating expense assumptions.

Net operating income is effective gross income minus operating expenses: the building’s profit before mortgage payments, income tax and capital spending. For our building, $162,960 − $55,920 = $107,040.

NOI = Gross potential rent − vacancy − operating expenses

NOI is the number that cap rate, DSCR and valuation all start from, so it is worth getting right. It excludes mortgage principal and interest, depreciation (capital cost allowance) and one-time renovations, so the same building has the same NOI no matter who owns it or how it is financed.

Two checks help. First, compare the NOI you calculate with the seller’s: a gap usually means missing expenses or a vacancy allowance of zero. Second, look at NOI per unit ($13,380 here) against similar buildings you have analyzed. The full method, including what counts as an operating expense, is in what is NOI.

Divide NOI by the price to get the cap rate, then compare it with recent sales of similar buildings to judge whether the price is reasonable. Our building’s cap rate is $107,040 ÷ $1,950,000 = 5.49%.

Cap rate = NOI ÷ Purchase price

CBRE’s Q2 2026 survey put Canadian low-rise Class B apartment cap rates at roughly 3.75% to 6% depending on the city, from Vancouver at the low end to Quebec City at the high end. A 5.49% cap rate is reasonable in Calgary, Edmonton or Halifax, and generous in Toronto or Vancouver if the NOI holds up.

Run it backwards too: value = NOI ÷ market cap rate. If similar buildings trade at 5.75%, this NOI supports about $1,861,600, which is a useful anchor for an offer. Small multiplexes can trade at different cap rates from the larger buildings in broker surveys, so weight local sales most. See cap rate vs. cash-on-cash return.

On a building of five or more units, the lender sizes the loan from DSCR (NOI ÷ annual mortgage payments), and that often allows less than the advertised loan-to-value. At 75% loan-to-value, $1,462,500 at an illustrative 4.9% over 25 years costs $101,075 a year, a DSCR of only 1.06.

A conventional lender requiring 1.20 will cap the annual payment at $107,040 ÷ 1.20 = $89,200, which supports a loan of about $1,290,700: 66% of the price. The down payment rises from $487,500 to about $659,300. Full detail is in what is DSCR, and down payment rules by property type are in rental property down payments in Canada.

CMHC-insured financing changes the picture. Its MLI Select program offers up to 95% loan-to-value and a 1.10 minimum debt coverage ratio on standard rental buildings, in exchange for affordability, energy efficiency or accessibility commitments and an insurance premium. Whether this building qualifies, and on what terms, is covered in CMHC MLI Select explained.

Once you know the loan, measure what your own cash earns: cash-on-cash return counts only cash flow, while total return also counts principal paydown. Using the DSCR-limited loan of $1,290,700 and $45,000 of closing costs, the buyer invests about $704,300.

A 2.5% cash yield is typical when Canadian cap rates sit below the mortgage constant (6.91% here). Decide whether paydown, rent growth and value-add make up the difference for you. See rental property cash flow in Canada for how to judge thin cash flow.

Value-add means raising NOI through higher rents, new income or lower costs, and every extra dollar of NOI is worth roughly NOI ÷ cap rate in building value. Suppose three units turn over in the first two years and re-rent $250 a month higher after light updates.

That adds $9,000 a year of rent and, after vacancy and management, about $8,370 of NOI. At a 5.49% cap rate it adds about $152,500 of value; using the more conservative GRM method (rent increase × GRM of 11.6) it adds about $104,500, or $34,800 per unit. DSCR on the existing loan rises from 1.20 to 1.29, which can support a refinance later; see BRRRR and cash-out refinancing.

Check rent rules before counting on upside. In Ontario, rent increases for sitting tenants in units first occupied on or before November 15, 2018 are capped by the annual guideline (2.1% for 2026), and the rent can reset only when a unit turns over. Other provinces have their own rules. PropStack’s rent optimization tool models target rent and cost unit by unit and shows monthly uplift and value added using GRM.

Estimate what the building could sell or refinance for in five to ten years by applying a cap rate to future NOI, and test a higher exit cap rate than today’s. If rents and expenses both grow 2.5% a year, NOI reaches about $137,000 after ten years, and the loan balance falls to about $949,300.

A one-point rise in cap rates erases about $388,000 of value even with ten years of NOI growth. Your exit can also be a refinance, a sale to fund a larger building, or holding indefinitely; the choice affects tax and risk. See buy and hold vs. BRRRR vs. flip for how the strategies compare.

Before you offer, change the assumptions that can go wrong (vacancy, expenses and the mortgage rate at renewal) and confirm the building still covers its debt. Here is the 66% loan (DSCR 1.20 in the base case) under pressure:

The building stays above 1.00 in every case, which is what conservative loan sizing buys you. At 75% loan-to-value, where DSCR starts at 1.06, an 8% vacancy rate alone would push it below 1.00.

PropStack runs a 10-year projection with Canadian semi-annual compounding and renewals, and you can save each scenario with your documents, photos and notes on the property. Analyze a multiplex without an account.