ImmoMulti — a direct buyer of income properties on the North Shore — says it at every valuation: a plex's price depends not only on its rents, but also on the return the market demands at the moment of sale. That required return is the capitalization rate (cap rate), known in Québec as the taux global d'actualisation (TGA). And it moves largely in step with interest rates. When rates rise, cap rates tend to rise and, at equal net operating income (NOI), the value of an income property falls. When rates come back down, the opposite happens. Understanding this mechanic — value = NOI ÷ cap rate — is essential to deciding the right time to sell your plex.
How the value = NOI ÷ cap rate formula governs your plex's price
The value of an income property is obtained by dividing net operating income (NOI) by the capitalization rate (cap rate). NOI is in the numerator, the cap rate in the denominator: the higher the required cap rate, the lower the price for the same NOI. This is the income approach used by appraisers and multi-unit buyers.
Net operating income (NOI) is normalized rental income minus operating expenses (taxes, insurance, maintenance, management), but before mortgage debt service. The cap rate expresses the return the market demands for this type of building. According to Collège MREX, it is obtained by dividing a recently sold building's normalized NOI by its transaction price: a 10-unit building producing $100,000 in NOI and sold for $1M traded at a 10% cap rate.
The consequence is powerful: at identical NOI, value moves inversely to the cap rate. As Collège MREX illustrates, a 10-unit building generating $78,000 in normalized net revenues is worth $780,000 at a 10% cap rate, but $1,560,000 at a 5% cap rate. The same building, the same rents — and a value that doubles based on the cap rate the market demands alone.
Source: Collège MREX — "Le TGA et les RNN : comment façonnent-ils la valeur d'un bloc appartement?"
Why interest rates push the cap rate higher
When interest rates rise, two forces push the cap rate up: mortgage financing costs more (reducing what a buyer can pay), and safe investments offer a better yield (making real estate less attractive at a low cap rate). Buyers therefore demand a higher cap rate, and the price falls at equal NOI.
The cap rate is not a fixed number: it is the price of risk at a given moment. An income-property buyer always compares your plex's return with other options — bonds, high-interest accounts, other buildings. When the Bank of Canada raises its policy rate, this entire yield landscape shifts upward. To stay competitive, real estate must also offer more — hence a higher cap rate.
But a higher cap rate in the denominator mechanically means a lower price for the same NOI. This is exactly what Collège MREX points out: a plex's price and its cap rate are inversely correlated — if the price falls, the cap rate rises, and vice versa. Rising rates do not "destroy" your building's value: they raise the required cap rate, which compresses the listed price.
The rule to remember
Interest rates ↑ → required cap rate ↑ → price ↓ (at equal NOI). Interest rates ↓ → required cap rate ↓ → price ↑ (at equal NOI). And NOI ↑ (rents, ancillary income) → price ↑, even if the cap rate stays flat.
What rates and the Québec plex market say in 2026
On June 10, 2026, the Bank of Canada held its policy rate at 2.25%. That stability, well below the 2023 peaks, supports cap rates and prices. According to APCIQ, in the first quarter of 2026, half of all plex transactions exceeded $675,000, an 8% increase year over year.
After the rate shock of 2022–2023, the 2026 context is gentler. The Bank of Canada held its target for the overnight rate at 2.25% on June 10, 2026 — a level well below the previous cycle's peaks. This stability eases upward pressure on cap rates: buyers finance at more predictable costs and accept tighter cap rates.
The plex market reflects this. According to APCIQ, in the first quarter of 2026, half of all plex transactions exceeded $675,000, an 8% increase year over year. The association notes that the stability of mortgage rates, now well below the 2023 peaks, is a positive factor for the 2026 market. This is the inverse of our rule in action: when rates stabilize or fall, cap rates stop widening and prices firm up.
| Annual NOI | Value at 5.0% cap | Value at 5.5% cap | Value at 6.0% cap |
|---|---|---|---|
| $40,000 | $800,000 | ~$727,000 | ~$667,000 |
| $60,000 | $1,200,000 | ~$1,091,000 | $1,000,000 |
| $78,000 | $1,560,000 | ~$1,418,000 | $1,300,000 |
Illustrative only (value = NOI ÷ cap rate). Calculation structure and $78,000 example based on Collège MREX. Median plex price: APCIQ.
How leverage amplifies the impact of rates on your plex
Leverage means buying a property partly financed by a mortgage. When rates are low, debt service is small and leaves the buyer more cash flow, so they can pay more. When rates rise, debt service eats into cash flow, the buyer must offer less, and prices fall. Leverage therefore amplifies price sensitivity to rates.
Almost no buyer pays cash for a multi-unit building. They finance most of it with a mortgage, and it is the cash flow after debt service — not just the NOI — that determines what they are willing to pay. That debt service depends directly on the mortgage rate, which is itself tied to the Bank of Canada's policy rate.
When rates are low, a larger share of NOI stays in the buyer's pocket after the mortgage payment: they can therefore offer a higher price (tighter cap rate) while still hitting their target return. When rates rise, the same building leaves thinner cash flow; to preserve the return on their down payment, the buyer must lower their offer. Leverage thus acts as an amplifier: it pushes prices higher in low-rate periods and lower in high-rate periods, more than the cap rate alone would.
Watch the lenders' ratios
In high-rate periods, lenders also tighten the required debt-coverage ratio (DCR): the same building "supports" less debt, which reduces the amount a buyer can borrow and, in turn, the price they can offer. A well-documented NOI then becomes decisive in preserving your plex's value.
What this changes for the timing of your North Shore plex sale
A low or falling-rate environment compresses cap rates and supports prices — more favourable for sellers. A high or rising-rate environment widens cap rates and weighs on values. The best moment to sell is when the achievable price and your personal situation align, not necessarily the theoretical peak.
For an owner of a plex on the North Shore, the lesson is direct: the rate context is an integral part of the value you will obtain. Selling in a window of stable or falling rates — like the 2026 context flagged by APCIQ — generally means tighter cap rates and more generous offers than during a full rate climb.
That doesn't mean waiting indefinitely for the "peak": no one knows it in advance, and future rates are uncertain. The right instinct is to compare the price achievable today against your goals (retirement, reallocation, simplification), rather than speculating on the Bank of Canada's next move. To situate your building in the local market, our analysis of the North Shore multi-unit market in 2026 provides useful context.
"A plex's price and its cap rate are inversely correlated: if the price falls, the cap rate rises, and vice versa."
— Collège MREX, on the value of multi-residential buildingsHow to protect your plex's value when rates rise
Since value = NOI ÷ cap rate, increasing NOI partly offsets a higher cap rate. Apply the rent increases permitted by the Tribunal administratif du logement, add ancillary income, reduce operating expenses, and rigorously document financials: a higher, well-demonstrated NOI supports value even when cap rates widen.
You have no control over the policy rate, but you do over your NOI — the other lever in the formula. Every additional dollar of NOI is worth, at a 5% cap rate, about $20 of building value. Here are the concrete levers for a multi-unit owner:
- Optimize rents: rigorously apply the increases permitted by the Tribunal administratif du logement to bring rents closer to market;
- Develop ancillary income: parking, laundry, storage — every recurring source lifts NOI;
- Control operating expenses: renegotiate insurance, cut energy consumption, streamline maintenance;
- Document and normalize: clean financials and a normalized NOI reassure the buyer and their lender, which tightens the cap rate they apply to your building.
A plex with an optimized, well-demonstrated NOI holds up far better in high-rate periods than a building with below-market rents and murky finances. And if you'd rather avoid market uncertainty, a direct sale lets you lock in a price now, without waiting for the next rate move. See also: Multiplex yield calculation — cap rate, GRM and NOI explained and Unprofitable plex in Québec 2026 — when does it make sense to sell?.
The anatomy of a cap rate: what is your plex's cap rate really made of?
A cap rate isn't an arbitrary number: it breaks down into a "risk-free" rate (driven by interest rates), a risk premium specific to rental real estate, and an adjustment for anticipated rent growth. Understanding these three building blocks explains why rising rates push the required cap rate up — and why not all plexes react the same way.
When an income-property buyer sets the cap rate they apply to your plex, they mentally stack several layers. The first is the risk-free rate: the return they could earn without taking any risk, typically approximated by government bond yields, themselves anchored to the Bank of Canada's policy rate. When the Bank of Canada raises its rate, this floor rises, and the whole cap-rate structure rises with it.
On top of that floor, the buyer adds a risk premium. According to Collège MREX, this premium stays relatively low for residential multi-unit properties — often on the order of 1.5% to 3% — because rental demand is stable and predictable. But it varies with property-specific factors: location quality, building age and condition, tenant stability, and lease strength. Collège MREX illustrates these adjustments: a location with local economic uncertainty may add about half a point, and an older but well-maintained building about two-tenths of a point.
The three building blocks of a cap rate
| Cap rate component | What it represents | What moves it |
|---|---|---|
| Risk-free rate | Base return of a safe investment | Bank of Canada policy rate, bond yields |
| Risk premium | Compensation for operating risk | Location, building age, lease quality, vacancy |
| Growth adjustment | Prospect of rising (or falling) rents | Below-market rents, ancillary-income upside, TAL regulation |
Framework and risk-premium orders of magnitude drawn from Collège MREX — "How to become a cap rate (TGA) expert?". Figures are indicative; your plex's actual cap rate depends on the local market.
The third block is the growth adjustment. A building with rents well below market offers NOI upside: the buyer then accepts a slightly tighter cap rate, because they anticipate income will rise. Conversely, an already "optimized" building, with rents at the market ceiling, offers no headroom, which pushes the cap rate up. That's why two neighbouring plexes, with identical income today, can trade at different cap rates.
Why it matters to you, the owner-seller
You don't control the risk-free rate, but you influence the risk premium (condition, leases, clean financial file). A well-documented, well-maintained building lowers the required risk premium — tightening the cap rate applied to your plex. And below-market rents are a card to play: they justify a tighter cap rate to a buyer who sees the NOI upside.
This breakdown also explains a common source of confusion: two buyers can quote different cap rates for the same building, simply because they don't assign the same risk premium to location or condition. There is no single "market" cap rate in the absolute: it's a range, and your job as a seller is to push the buyer toward the bottom of that range by reducing perceived risk.
How do you test the effect of a rate shock on your plex step by step?
To measure a rate change's impact on your plex, work in five steps: normalize your NOI, derive your current cap rate from comparables, apply an up-and-down cap-rate scenario, recompute value, then compare the gap in dollars. This method turns a vague hunch into a concrete price range.
The value = NOI ÷ cap rate formula is simple, but applying it rigorously to your own building takes method. Here is the procedure an appraiser or a savvy buyer would follow for a North Shore plex.
Step 1 — Normalize NOI
Start from actual rental income, then bring it to market if some rents are abnormally low or high. Next subtract normalized operating expenses: municipal and school taxes, insurance, recurring maintenance, management, common-area energy, and a provision for vacancy and bad debt. Never include mortgage debt service: NOI is computed before financing. An NOI inflated by omitted expenses is the classic trap that derails a valuation.
Step 2 — Derive your current cap rate
The "market" cap rate is derived from recent sales of comparable buildings: divide a sold plex's normalized NOI by its sale price. If three comparable duplexes sold at cap rates of 4.8%, 5.1% and 5.3%, your starting cap-rate range is around 5.0%. Collège MREX notes the cap rate is obtained precisely this way, from recently traded buildings.
Step 3 — Apply a rate scenario
Simulate what would happen if the market required a higher cap rate (rate rise) or a lower one (rate cut). Test at least three points: your current cap rate, +0.5 point and +1.0 point. Half a point is not trivial: moving from a 5.0% to a 5.5% cap rate is already a value drop of about 9% at constant NOI.
Step 4 — Recompute value
Divide your normalized NOI by each scenario's cap rate. You get a range of values, from best to worst rate case. This range is far more useful than a single number: it tells you what your patience (or your haste) actually costs.
Step 5 — Compare the gap in dollars
| Step | Worked example (NOI $50,000) | Result |
|---|---|---|
| Normalized NOI | Income $84,000 − expenses $34,000 | $50,000 |
| Current cap rate (comps) | Average of 4.8% / 5.1% / 5.3% | ~5.0% |
| Value at current cap rate | $50,000 ÷ 5.0% | $1,000,000 |
| Value if cap rate +0.5 pt | $50,000 ÷ 5.5% | ~$909,000 |
| Value if cap rate +1.0 pt | $50,000 ÷ 6.0% | ~$833,000 |
Illustration only (value = NOI ÷ cap rate). The method of deriving the cap rate from comparables follows the logic of Collège MREX.
In this example, a single point of cap rate — the equivalent of a moderate rate-hike cycle — erases $167,000 of value on a million-dollar building. That's the kind of gap that justifies calculating seriously, rather than "feeling" the market. You can automate these scenarios with ImmoMulti's cap rate calculator, which instantly recomputes value for each cap rate tested.
The un-normalized NOI trap
Many owners compute their value from an over-optimistic NOI: projected rents never achieved, understated maintenance, no vacancy provision. A serious buyer will renormalize your NOI downward, then apply their cap rate. The resulting price can disappoint. Better to do this exercise honestly beforehand, so you aren't caught off guard.
From the policy rate to your buyer's mortgage rate: how does the increase spread?
The Bank of Canada's policy rate doesn't act directly on your plex's value: it transmits in stages. It influences short-term rates and bond yields, which set the mortgage rates offered to your buyer. A higher mortgage rate reduces the buyer's cash flow, hence the price they can offer, which widens the market cap rate.
It's tempting to believe a Bank of Canada decision moves your price instantly. The reality is a multi-link transmission chain, and each link adds a delay and a nuance.
Link 1: the policy rate
The Bank of Canada sets its target for the overnight rate on eight fixed dates per year. In 2026, it held it at 2.25% at its January 28, April 29 and June 10 announcements, and published a new Monetary Policy Report with the July 15, 2026 announcement. This rate anchors the very-short-term cost of money across the financial system.
Source: Bank of Canada — policy rate announcement and Monetary Policy Report (July 15, 2026). Check the official policy-rate page for the current value.
Link 2: bond yields
Fixed mortgage rates don't follow the policy rate directly: they mainly follow government bond yields of matching maturity. These yields embed the market's expectations for inflation and future central-bank decisions. That's why a fixed mortgage rate can rise before the Bank of Canada even acts, if the market anticipates hikes.
Link 3: the buyer's mortgage rate
Your buyer's lender adds its margin on top of the funding cost. The resulting mortgage rate determines debt service — and thus the cash flow left to the buyer after paying the loan. It's this cash flow, more than gross NOI, that governs the price an investor can offer for your multi-unit building.
| Link | Variable | Effect on your plex |
|---|---|---|
| 1. Bank of Canada | Policy rate (2.25% in 2026) | Anchors short-term cost of money |
| 2. Bond market | Bond yields | Sets the base for fixed mortgage rates |
| 3. Lender | Mortgage rate + margin | Determines the buyer's debt service |
| 4. Buyer | Net cash flow + required return | Sets the price offered → the market cap rate |
This cascading mechanism has an important consequence for the seller: your plex's price reflects expected rates as much as current rates. A market pricing in rate cuts can support tight cap rates today, before the Bank of Canada even acts. Conversely, a mere fear of a rebound can cool buyers and widen cap rates, even if the policy rate hasn't moved yet.
"On eight fixed dates per year, the Bank of Canada announces by press release its decision on the target for the overnight rate and explains the factors behind it."
— Bank of Canada, on the rate-announcement schedule
Three plexes, three reactions: how the same rate rise hits differently
The same cap-rate rise doesn't hit all plexes equally. A newer, low-cap-rate building loses more absolute value than a below-market-rent building, whose NOI upside cushions the shock. Three worked examples show it: the NOI lever can offset, or even exceed, the effect of rising rates.
To make the mechanics tangible, let's compare three North Shore plexes facing the same scenario: a cap rate moving from 5.0% to 5.5% (the typical effect of a moderate rate-hike cycle).
Plex A — the newer, "optimized" building
A recent quadruplex, rents already at market, NOI of $60,000, trading at a tight 5.0% cap rate. Starting value: $1,200,000. At a 5.5% cap rate, value drops to ~$1,091,000 — a loss of about $109,000. Since rents are already at the ceiling, there is no NOI lever to cushion the shock. This building takes the rate rise full force.
Plex B — the below-market-rent building
An older triplex, rents 15% below market, current NOI of $45,000, but a "market" NOI of $52,000 achievable by applying permitted increases. At 5.0%, its current value is $900,000. Even if the cap rate rises to 5.5%, bringing NOI up to market ($52,000 ÷ 5.5%) gives ~$945,000 — that is, more than the starting value. Here, the NOI lever more than offsets the rate rise.
Plex C — the building with ancillary income to develop
A sixplex with unpriced parking and a laundry to modernize. Current NOI $70,000, upside of +$6,000 in ancillary income. At 5.0%, value of $1,400,000. With a 5.5% cap rate but NOI raised to $76,000: ~$1,382,000 — a loss cut to about $18,000 instead of the $127,000 the cap-rate rise alone would have caused on unchanged NOI.
| Plex | Value at 5.0% cap rate | Value at 5.5% cap rate (optimized NOI) | Net effect |
|---|---|---|---|
| A — newer, rents at market | $1,200,000 | ~$1,091,000 | −$109,000 |
| B — below-market rents | $900,000 | ~$945,000 | +$45,000 |
| C — ancillary income | $1,400,000 | ~$1,382,000 | −$18,000 |
Illustrative examples (value = NOI ÷ cap rate). Amounts are hypothetical, meant to demonstrate the mechanics; they do not represent actual transactions.
The lesson is clear: the cap rate is dictated by rates, but NOI is something you steer. An owner who has left NOI upside untapped holds, without knowing it, an insurance policy against rising rates. This is exactly why preparing a building before sale — legitimate rent increases, ancillary income, controlled expenses — often matters more than perfect market timing.
What mistakes do owners make when facing rates and cap rates?
The costliest mistakes are: confusing market value with the municipal assessment, ignoring NOI normalization, believing rates affect all plexes equally, waiting indefinitely for the price "peak," and neglecting the debt service coverage ratio. Each can cost tens of thousands of dollars at sale.
After hundreds of income-property valuations, certain mistakes recur strikingly often among owner-sellers. Here they are, with the corresponding fix.
Mistake 1 — Confusing economic value with the municipal assessment
The municipal assessment is used to compute taxes, not to set the sale price. A plex's market value is computed from income (value = NOI ÷ cap rate) and can diverge sharply from the assessment roll. Relying on the roll to set your price leads either to leaving money on the table or to posting an unrealistic price.
Mistake 2 — Using an un-normalized NOI
Presenting projected income never collected, or forgetting expenses (vacancy, maintenance, management), artificially inflates NOI. The buyer and their lender will renormalize it, and the price will fall. An honest, documented NOI is your best ally.
Mistake 3 — Thinking rates hit all plexes the same
As our three examples showed, a below-market-rent building holds up far better than an already-optimized one. Assuming a uniform value drop leads to mis-evaluating your own building.
Mistake 4 — Waiting for the perfect "peak"
No one knows the price peak in advance. Waiting for a hypothetical extra rate cut means betting against an unpredictable market while bearing the costs and risks of holding. The right benchmark isn't the theoretical peak, but the alignment between the achievable price and your life goals.
Mistake 5 — Ignoring the debt service coverage ratio (DSCR)
In high-rate periods, lenders tighten the required DSCR. The same building then "supports" less debt, reducing the amount the buyer can borrow — and hence their offer. A robust NOI and a clean file help preserve the buyer's borrowing capacity, and by extension your price.
| Common mistake | Consequence | Fix |
|---|---|---|
| Relying on the municipal assessment | Unrealistic or undervalued price | Compute value from income (NOI ÷ cap rate) |
| Un-normalized NOI | Price renegotiated downward | Normalize income and expenses honestly |
| Believing in a uniform drop | Mis-evaluating your plex | Account for NOI upside |
| Waiting for the price peak | Holding costs, reversal risk | Align achievable price and goals |
| Ignoring the DSCR | Reduced buyer borrowing capacity | Strengthen and document NOI |
Which special cases partly escape the "rates up → price down" rule?
The general rule — rising rates, falling prices — has exceptions: highly sought-after areas where scarcity dominates, buildings with strong repositioning potential, regional markets catching up, and off-market gré-à-gré sales negotiated privately. In these cases, other forces can outweigh the effect of rates.
The value = NOI ÷ cap rate mechanics are robust, but they apply in a real market where other factors intervene. Here are the main exceptions to keep in mind.
Areas where scarcity dominates
In some highly sought-after North Shore areas, demand durably exceeds supply. Competition among buyers can then keep cap rates tight even as rates rise, because the scarcity of quality buildings outweighs the pure yield calculation.
Buildings with strong repositioning potential
A building with rents well below market, under-used spaces, or the possibility of adding units offers such NOI upside that the buyer looks at future value more than current value. This potential can offset rising cap rates, as our Plex B illustrated.
Regional markets catching up
Some markets rise for local reasons that overshoot the effect of rates. According to APCIQ, in the first quarter of 2026 the median plex price jumped 27% in the Trois-Rivières CMA and 24% in Saguenay — well above the province-wide 8% rise. Regional dynamics can therefore temporarily dominate the effect of interest rates.
Off-market and gré-à-gré sales
In a direct sale, the price is negotiated between two parties without public listing. Speed, closing certainty and the absence of commission can shape the deal as much as the "theoretical" cap rate. It's an avenue to consider when predictability matters more than squeezing the last dollar.
Takeaways on the exceptions
Scarcity and location can keep cap rates tight despite high rates; untapped NOI upside is the best protection against a rising cap rate; regional dynamics can, short-term, dominate the effect of rates; and a gré-à-gré sale changes the decision criteria beyond cap rate alone.
Regional data: APCIQ — first-quarter 2026 statistics.
What should a North Shore seller watch to time the market?
To time a plex sale intelligently, watch four signals: the Bank of Canada's rate trajectory and its guidance, the trend in bond yields (which lead fixed mortgage rates), local cap-rate movement in recent comparable sales, and your own NOI readiness. No single signal decides; their alignment does.
Rather than trying to call the exact bottom of cap rates, a seller is better served by tracking a small dashboard of signals and acting when they align with personal goals. Here is what an experienced owner-seller keeps an eye on.
Signal 1 — The policy-rate trajectory and guidance
The Bank of Canada not only sets the rate on eight fixed dates a year — it also signals its intentions. A central bank on hold or leaning toward cuts, as through much of 2026 at 2.25%, tends to support tight cap rates. Guidance leaning toward hikes does the opposite. Read the tone, not just the number.
Signal 2 — Bond yields as a leading indicator
Because fixed mortgage rates track government bond yields, a sustained move in yields often foreshadows where buyers' financing costs — and thus their offers — are heading. Rising yields are an early warning that cap rates may widen; falling yields, that they may tighten.
Signal 3 — Local cap-rate trend in comparables
Nothing beats recent local evidence. Track the cap rates implied by comparable North Shore plex sales over the past few quarters. A clear tightening trend, alongside faster selling times, tells you the market is rewarding sellers — as APCIQ's early-2026 reading of a 51-day median selling time for plexes suggested.
Signal 4 — Your own NOI readiness
The one signal you fully control. A building with rents brought to market, ancillary income developed, and clean, normalized financials is "sale-ready" and defends its price regardless of the rate backdrop. If your NOI still has obvious upside, capturing it before listing often outweighs a small favourable rate move.
A simple decision rule
Sell when the achievable price today meets your goals and your NOI is optimized — not when you think you've perfectly called the peak. The market rewards prepared sellers far more reliably than lucky timers, and a direct sale lets you lock a price now rather than wait on the next Bank of Canada move.
Glossary: cap rate, NOI, GRM, DSCR and leverage explained simply
Five notions come up constantly when discussing a plex's value: the cap rate, NOI (net operating income), GRM (gross rent multiplier), DSCR (debt service coverage ratio) and leverage. Mastering them lets you deal on equal footing with a buyer or a lender.
The vocabulary of income property often intimidates owners selling for the first time. Here are the essential definitions, in plain language.
Cap rate (capitalization rate)
The return the market demands for a type of building. It's obtained by dividing NOI by price: a building with $100,000 of NOI sold for $2M shows a 5% cap rate. The higher the cap rate, the lower the price at equal NOI. It's the variable most sensitive to interest rates.
NOI (net operating income)
Normalized rental income minus operating expenses (taxes, insurance, maintenance, management, energy, vacancy provision), before debt service. It's the numerator of value: the only lever you directly control.
GRM (gross rent multiplier)
A quick ratio: price ÷ gross income. It serves as a rough market benchmark, but it ignores expenses, so it's less reliable than the cap rate. Useful for quick comparisons, insufficient for fine valuation.
DSCR (debt service coverage ratio)
The ratio of NOI to annual debt service. Lenders require a minimum (often above 1.1 to 1.2) to ensure the building generates enough to cover the mortgage. When rates rise, debt service increases and the DSCR deteriorates, reducing the buyer's borrowing capacity.
Leverage
Financing the building partly with debt. It amplifies the return on down payment when rates are low, but also amplifies price sensitivity to rates: it's the multiplier that makes the multi-unit market so reactive to Bank of Canada decisions.
| Term | Formula / definition | Role in value |
|---|---|---|
| Cap rate | NOI ÷ price | Denominator — sensitive to rates |
| NOI | Net income − expenses (before debt) | Numerator — under your control |
| GRM | Price ÷ gross income | Quick benchmark, less precise |
| DSCR | NOI ÷ debt service | Limits the buyer's borrowing capacity |
| Leverage | Share financed by debt | Amplifies sensitivity to rates |
These five notions form the common language of every income-property buyer. An owner-seller who handles them with ease inspires confidence, negotiates better, and avoids having too wide a cap rate imposed on their North Shore plex.
Informational content only. Interest rates, cap rates, and market data are subject to change. Figures are illustrative; consult a chartered appraiser, mortgage broker, or accountant for advice specific to your property and situation.
