What is Capitalization rate (cap rate)?

Ratio of net operating income to purchase price. It measures the property's return independent of financing.

What is Net operating income (NOI)?

Gross rent minus operating expenses (taxes, insurance, maintenance, management, vacancy), before debt service.

What remains after all expenses and the mortgage payment. If positive, the property covers its own costs.

What is Cash-on-cash return?

Annual cash flow divided by the money actually invested (down payment and closing costs). Measures return on your capital.

What is Gross rent multiplier (GRM)?

Purchase price divided by annual gross rent. The lower it is, the more affordable the property is relative to its income.

What is Debt service coverage ratio (DSCR)?

Net operating income divided by debt service. Above 1, the property covers its payments; lenders watch it closely.

Investor glossary

The key terms of rental real estate investing, explained simply.

Capitalization rate (cap rate): Ratio of net operating income to purchase price. It measures the property's return independent of financing.; Profitability calculator
Net operating income (NOI): Gross rent minus operating expenses (taxes, insurance, maintenance, management, vacancy), before debt service.
Cash flow: What remains after all expenses and the mortgage payment. If positive, the property covers its own costs.
Cash-on-cash return: Annual cash flow divided by the money actually invested (down payment and closing costs). Measures return on your capital.; Profitability calculator
Gross rent multiplier (GRM): Purchase price divided by annual gross rent. The lower it is, the more affordable the property is relative to its income.
Debt service coverage ratio (DSCR): Net operating income divided by debt service. Above 1, the property covers its payments; lenders watch it closely.
After-repair value (ARV): Estimated market value of a property once renovations are complete. Central to the BRRRR strategy.; BRRRR calculator
Land transfer tax (welcome tax): Tax paid when buying a property, computed by brackets on value. It varies widely by province and municipality.; Land transfer tax calculators
Capital cost allowance & recapture: Capital cost allowance lowers tax while you hold; on sale, the depreciation taken is "recaptured" and taxed.; Guide: CCA recapture
Refundable dividend tax (RDTOH): Part of a corporation's investment tax refunded when a dividend is paid. Explains why incorporation changes little the tax on passive income.; Incorporation comparison
BRRRR: Buy, rehab, rent, refinance, repeat: a strategy to recover your capital by refinancing on the after-repair value.; Guide: BRRRR strategy
Overall capitalization rate (TGA): Term used in Quebec for the capitalization rate: net operating income divided by the property's value. It is the inverse of the net income multiplier (MRN).; Profitability calculator
Net income multiplier (MRN): Purchase price divided by net operating income. The lower it is, the more affordable the property is relative to its net income; it is the inverse of the overall cap rate (TGA).; Profitability calculator
Normalized net income: Net operating income recomputed with market-representative expenses and vacancy, to value a property on a comparable basis rather than on the figures shown in the listing.
MLI Select (CMHC financing): CMHC's multi-unit mortgage insurance program that grants better terms — higher financing, longer amortization, lower premium — based on a points system rewarding affordability, energy efficiency and accessibility.
GDS and TDS (debt-service ratios): Gross debt service (GDS) compares housing costs to gross income; total debt service (TDS) adds other debts. Lenders cap these ratios to qualify a borrower.; Guide: borrowing capacity and the stress test
Adjusted cost base (ACB): The tax cost of a property: purchase price plus acquisition costs and capital improvements. It is the basis for computing the capital gain on sale.; Guide: capital gains
FHSA (First Home Savings Account): First Home Savings Account (CELIAPP in French): contributions are deductible and qualifying withdrawals for a first home are tax-free. Useful to the owner-occupant of a plex.; Guide: using your FHSA to buy a plex
Tribunal administratif du logement (TAL): Quebec's public tribunal for residential leases: rent-setting, repossession, notices and recourse. Formerly named the Régie du logement, until August 31, 2020.; Guide: 2026 rent increase (TAL)

From definitions to analysis

Knowing the terms is the foundation; the decision comes from computing them. The copilot applies cap rate, cash flow and after-tax analysis to your actual property — a clear verdict and a 10-year projection.

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