This is for educational purposes only; it does not guarantee future performance or serve as financial or tax advice.
When it comes to real estate investing, one big question always comes up: should you focus on cash flow or appreciation? The reality is, you need both—but depending on where you are in your investment journey, one might be more important than the other.
Why Cash Flow Matters More for New Investors
For those just starting out, cash flow is crucial. It covers your mortgage, property expenses, and even your lifestyle.
Retirees also prioritize cash flow, but for investors with limited capital, steady rental income makes scaling up easier. If your property pays for itself, you’re not constantly putting in money—you’re earning from day one.
If cash flow is your priority, markets like Calgary stand out. Right now, multi-family cap rates in Calgary are around 5.5%, compared to about 4.25% in Toronto. That means stronger rental returns, making it easier to cover costs and qualify for financing. For investors looking for lower upfront costs and better cash flow, Calgary or Edmonton might be the better bet.
Source: Q4 2024 Cap Rate Report, Colliers Canada
But Don’t Ignore Appreciation
While cash flow is great, long-term wealth comes from appreciation. Looking at trends since 2005, Toronto has consistently outperformed Calgary.
Even if rental income is higher out west, Toronto’s property values have historically grown about 4% more per year. Over time, that adds up. Plus, appreciation is taxed at a lower rate than rental income, so you keep more of your profits.
Source: CREA HPI, March 2025
Condos vs. Houses: Which One Wins in Toronto?
Toronto’s condo market isn’t what it used to be. Prices have dropped and now seem stuck. Investors are hesitant—high negative cash flow and slow price growth make condos a tough sell. At the same time, many sellers won’t budge on price, so listings just sit on the market.
Does the usual rule—that lower cap rates mean higher appreciation—still apply to condos? Not really. Between 2010 and 2020, condos saw massive gains, but that was driven by pre-construction flipping. Once interest rates spiked, that strategy stopped working. Condo prices corrected in 2022 and are still searching for a new equilibrium.
If you look at long-term data, houses in Toronto have appreciated more than condos. Why? More end users buy houses, while condos attract more speculators. Plus, Toronto’s land is limited, meaning fewer new houses, whereas condos keep getting built. On top of that, houses tend to have better cap rates since condo fees eat into rental income.
Source: CREA HPI, March 2025
Finding the Best of Both Worlds
Toronto’s average cap rate is around 4.25%, but in this buyer’s market, we’re seeing much better deals. Some properties now offer cap rates of 5-6%—similar to Calgary but with Toronto’s stronger appreciation potential.
If you really want to maximize returns, value-add projects in Toronto are the way to go. Renovation costs are similar across Canada, but because property values are higher in Toronto, your return on investment is bigger.
Here’s an example:
- Buy a semi-detached home in Toronto for ~$800,000
- Invest $150,000 to convert it into three units
- Gain ~$150,000 in value-add appreciation
- Generate ~$1,500 in monthly cash flow, and if you add a garden suite, your rental income and cash flow go even higher.
Next Steps - Let's Connect!
If you’re thinking about investing in Toronto multiplexes and want to see what’s possible, let’s chat. We don’t guess—we run the numbers and help you make data-driven decisions. Whether you want a fully renovated turnkey property or one with conversion potential, we guide you every step of the way.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
- Market Search & Purchase: We’ll search the market to find the perfect property for you.
- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!
What Toronto Real Estate Investment Is Right For You?
Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!
