Not just a cap rate. See what a deal actually pays you — after financing.
Start with what the property brings in before any expenses.
Everything it costs to run the property — not including your mortgage.
This is where cap rate turns into a real answer — what you'd actually walk away with.
Cap rate ignores your mortgage. This doesn't.
What would this NOI justify paying, at a given target?
The minimum occupancy needed to cover expenses and debt service.
General market guidance by asset class — always confirm against current local comps.
| Asset class | Typical range |
|---|---|
| Multifamily | 4.5% – 6.5% |
| Office | 6.0% – 8.5% |
| Retail | 5.5% – 8.0% |
| Industrial | 5.0% – 7.0% |
| Hospitality | 7.0% – 10.0% |
| Mixed-Use | 5.5% – 7.5% |
A capitalization (cap) rate measures a commercial property's unlevered annual return. It's calculated as Net Operating Income (NOI) divided by the property's purchase price or current market value, expressed as a percentage. It tells you what the property yields before financing is factored in.
There's no single good cap rate — it depends on asset class, location, and risk tolerance. Generally, lower cap rates (4-6%) reflect lower-risk, stabilized assets like multifamily in strong markets, while higher cap rates (7-10%+) reflect higher risk or higher management-intensity assets like hospitality. Always compare against similar properties in the same asset class and market rather than a single benchmark number.
Cap rate ignores financing entirely — it's a measure of the property's own performance. Your actual cash-on-cash return, which accounts for your mortgage payment and the cash you actually invest, can be higher or lower than the cap rate depending on whether your financing terms create positive or negative leverage. This is why a deal with a lower cap rate can sometimes produce a better cash-on-cash return than one with a higher cap rate, depending on how it's financed.
Debt Service Coverage Ratio (DSCR) measures how many times over a property's NOI covers its annual mortgage payment. Most commercial lenders require a minimum DSCR, commonly around 1.20 to 1.25, meaning the property needs to generate at least 20-25% more income than the debt payment requires. A DSCR below 1.0 means the property doesn't generate enough income to cover its own mortgage.
Not necessarily. A lower cap rate often reflects a lower-risk, higher-quality asset in a strong location with stable, well-documented income — investors accept a lower yield in exchange for that stability. A higher cap rate can mean more income relative to price, but often comes with more risk, more management intensity, or a less desirable location. The right cap rate depends on your investment goals and risk tolerance.
NOI is calculated by taking the property's gross potential income, subtracting a vacancy and credit loss allowance to get effective gross income, then subtracting all operating expenses (property taxes, insurance, maintenance, management fees, utilities not paid by tenants, etc.). NOI does not include mortgage payments, capital expenditures, or income taxes.
We source capital across Canada — not limited by region or property type. Multi-unit, retail, industrial, mixed-use, we've financed it. Let's talk about what this deal could actually look like once it's structured properly.
Talk to Craigburn