Rental yield & cap rate.

Gross yield, net yield and cap rate are not the same test

Gross yield is the simplest and roughest: annual rent divided by purchase price, with no expenses subtracted. It's a fast way to screen listings, and nothing more — two properties with an identical gross yield can have very different real returns once one turns out to have a leaking roof and the other doesn't.

Net yield and cap rate use the same numerator, net operating income (NOI): what's left of the rent after operating costs, before a mortgage payment or depreciation is subtracted. The difference between them is only the denominator. Net yield is conventionally measured against your purchase price — it answers “what did my money earn on the deal I actually did.” Cap rate is conventionally measured against the property's current market value — it answers “what would this property earn someone buying it today,” which is the figure appraisers and commercial buyers compare across properties regardless of what any one owner paid. At the moment of purchase the two numbers are identical, because price and value are the same thing; they diverge only after the property appreciates or depreciates.

What counts as an operating expense (and what never does)

NOI is built from the same short list every time: property tax, insurance, maintenance and repairs, property management, HOA or condo fees, and any utilities the owner (not the tenant) pays. What it deliberately excludes is the financing decision — mortgage principal and interest — and the accounting decision — depreciation (capital cost allowance). Both are real costs to you, but they depend on how you financed the deal and how you file your taxes, not on how the property itself performs, which is the whole point of NOI: it lets you compare a property bought with cash to the same property bought with a mortgage, and compare a property in your hands to the same property in someone else's.

Capital expenditures — a new roof, not a patched one — are also excluded from NOI in the standard definition, though a careful investor budgets for them separately as a reserve. This calculator follows the standard exclusions: only the six categories above reduce the rent.

What's a good cap rate in Canada?

There is no single number: cap rates move with property type, location and the interest rate environment, and a lower cap rate isn't automatically worse — it can just mean the market is pricing that asset as lower-risk or higher-growth. As a rough order of magnitude from commercial market surveys, multifamily residential has historically traded at the lower end of the range (roughly 3.5%–5%), with retail and industrial running somewhat higher and highly variable by location and vintage. Treat any single published range as dated the day it's printed and a starting point for comparison, not a pass/fail line — compare the number this tool gives you against recent, similar sales in the same neighbourhood, not against a national average.

Sources, and what's standard convention rather than a cited rule

Unlike a government-set rate, there is no single regulator that defines "cap rate" or "rental yield" — these are standard real-estate-finance terms, and the calculation itself was checked against the sources below on 29 September 2026.

• Capitalization rate — cap rate defined as net operating income divided by current market value; confirms depreciation and mortgage interest are excluded from NOI
• Capitalization Rate — Corporate Finance Institute — confirms cap rate = NOI ÷ current market value, and that NOI is income after operating expenses

Gross yield and net yield are simpler derivations of the same NOI concept, applied against the purchase price rather than current value; this is standard industry usage rather than a single citable formula, and this tool states which figure it is using at each step.