Introduction
On the surface, there is a 6-plex listing in Toronto that looks pretty interesting. It’s been nicely renovated and is fully rented at market rates. The best part? The current owner has a super low mortgage rate of 2.19% until late 2026.
This translates to around $4,400 in positive cash flow each month – sounds awesome, right? Let’s take a closer look.
How To Properly Assess The Investment
Cash Flows At Market Mortgage Rates
That incredible cash flow is entirely due to the low interest rate. If we look at the property on its own, with a more typical 20% down payment and a 4.5% 3-year fixed rate, it actually becomes cash flow negative.
Evaluating the Cap Rate
A better way to evaluate the property’s performance is to look at the cap rate – the annual net operating income divided by the property value.
At the current selling price, this 6-plex has a cap rate of 4.6%, which is the average for Canadian multi-unit residential commercial real estate these days. You’ll need around a 4.8% cap rate to break even, so the higher the better for cash flows.
The Capital Required
Another important factor is the capital required. With a $2.3 million mortgage on the property, you’ll need to fork out close to $1 million in capital to buy this building, including closing costs. That’s a significant amount of money.
Comparing to a Typical 3-Unit Home
The Bottom Line
The 6-plex isn’t a bad deal, and it’s probably priced right based on current market conditions. You’ll get better-than-average cash flows for the next couple of years, thanks to the low mortgage rate. However, that rate will be gone after 2026, so the long-term potential may not be as attractive.
In the current softer market, you might be able to find better opportunities with more motivated sellers, where you can get higher returns while fronting less capital. The key is to look beyond the short-term and consider the long-term potential and capital efficiency of any investment.
How We Can Help
If you’re thinking about investing in a multiplex in Toronto, we’re here to make it easy for you. Our real estate sales brokerage specializes in multifamily properties, whether you’re looking for a ready-to-go multiplex or want to convert a single-family home.
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: 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 support you through the whole process.
- 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!
