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🇨🇦 Canada guide5 min read

Rental Yield in Canada: The Investor's Guide

Canadian rental yields have compressed as prices have risen faster than rents. Here's how to calculate the real return on Canadian investment property and what to expect in different markets.

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Key takeaways

  • ✓Toronto and Vancouver gross yields typically 3–5% — often below mortgage rates
  • ✓Secondary markets (Hamilton, London ON, Edmonton, Calgary) offer 4.5–7% gross
  • ✓Rental income is taxed as ordinary income; expenses are deductible
  • ✓Principal residence exemption does not apply to investment properties
  • ✓Multi-family properties typically offer better yields than detached homes in the same market

Canadian rental yield calculation

Gross yield: (Annual Rent / Property Value) × 100.

Net yield deducts all operating expenses: property management (8–12% of rent), maintenance, property taxes, insurance, and vacancy allowance.

In Toronto: Average condo gross yield ~3.5–4.5% in 2024. After expenses (management CA$2,500, maintenance CA$2,000, property taxes CA$3,500, insurance CA$1,500, vacancy CA$1,200), net yield is typically 1.5–2.5%.

With a CA$560,000 mortgage at 5.5%, annual interest ~CA$30,000, the property is significantly negatively geared before depreciation or capital growth.

Rental yield by Canadian city

Toronto: Gross 3.5–5%. High prices, strong rental demand. Typically negatively geared without significant equity.

Vancouver: Gross 3–4.5%. Among the lowest nationally due to extreme prices relative to rents.

Calgary / Edmonton: Gross 5–8%. Most competitive yields among major Canadian cities. Better cash flow, though appreciation has been more volatile historically.

Hamilton / Kitchener-Waterloo: Gross 4–6%. Secondary Ontario markets with better yield fundamentals than Toronto.

Ottawa: Gross 4–5.5%. Stable government employment base, solid rental market.

Montreal: Gross 4–6%. Quebec-specific rental regulations require understanding before investing.

Tax treatment of Canadian rental income

Key points on Canadian rental income taxation:

Allowable deductions: mortgage interest, property taxes, insurance, repairs, property management fees, advertising, and accounting fees.

Capital Cost Allowance (CCA): Buildings (Class 1, 4%) can be depreciated — but CCA cannot create or increase a rental loss. Creates a recapture obligation when the property is sold.

Capital gains: When selling, 50% of the gain is included in income and taxed at your marginal rate for gains under CA$250,000. The 2024 budget increased the inclusion rate to 2/3 above this threshold.

Ontario and BC have the most tenant-friendly legislation — understand eviction procedures and rent increase rules before investing in these provinces.

💡 Tip: Always speak to a CPA familiar with Canadian real estate before purchasing a rental property. The interaction of rental income, capital gains, recapture, and other income can create unexpected tax consequences.

Frequently Asked Questions

Calculators mentioned in this guide

Rental Yield Calculator

Calculate gross and net yield on any Canadian investment property.

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Mortgage Payment Calculator

Model your investment property mortgage with Canadian compounding.

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Rent vs Buy Calculator

Compare buying as an investor vs renting and investing the difference.

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Disclaimer: Calculations are estimates for informational purposes only and do not constitute financial advice. Mortgage rules, taxes, and CMHC insurance requirements vary by province. Consult a licensed mortgage broker before making financial decisions.