Three hypothetical investment case studies

How these cases work

• Every figure is an assumption chosen to illustrate the math. None is a quote, a current rate or a client result.
• Mortgages use a 4.5% five-year fixed rate with semi-annual compounding, so payments do not change within the five years.
• Land transfer tax uses Ontario’s rates, with the first-time buyer refund only in Case B.
• Five-year views assume a sale at the end, with selling costs of 5% of the price (an assumption). Results are before income tax.
• Each case shows three outcomes: prices rising 2% a year, prices flat, and a downside.

For the formulas, see rental property numbers. For how to build a downside, see stress-test your investment.

Case A: a one-property condo investor in Mississauga

Hypothetical example

A two-bedroom condo apartment bought as a pure rental, first occupied after 15 November 2018, so rent increases are not capped by the guideline. For context, CMHC’s 2025 survey put the average GTA two-bedroom condo rent at $2,904.

Assumptions and financing

Year one

Gross rent $32,400, less $972 vacancy and $12,548 of operating costs, gives net operating income of $18,880. The cap rate is 3.15%, well below the 4.5% mortgage rate. After $31,880 of mortgage payments, cash flow is −$13,000 a year (−$1,083 a month).

Five years later

Rent grows 2% a year and costs 3% a year in the first two columns. The downside assumes rent 10% lower with no growth and two months vacant each year. It adds a 15% higher condo fee and a sale 10% below the purchase price.

Renewal risk: if the remaining $421,423 renewed at 6.5% over 20 years, the payment would rise from $2,657 to $3,121 a month.

What this case teaches: a low cap rate plus a condo fee makes cash flow deeply negative. The owner relies almost entirely on price growth. Even at 2% a year, the five-year gain is small for the cash at risk.

Case B: a first-time buyer’s house hack in Brampton

Hypothetical example

A first-time buyer buys a semi-detached house with a registered basement unit, lives upstairs and rents the basement. Because the owner lives there, the home qualifies for an insured mortgage with the minimum down payment.

Assumptions and financing

Confirm the exact insurance premium for a 30-year amortization with your lender. Each lender also decides how much basement rent it counts toward qualifying.

Monthly housing cost

Five years later

The tenant’s rent pays about $114,000 of the house’s costs over five years at a flat $1,900. The mortgage falls to $748,480, so $73,120 of principal is repaid. Rental income is taxable, with a share of costs deductible.

Downside notes: at a 10% lower price, the owner would have to bring about $21,730 to closing to sell. If the remaining balance renewed at 6.5% over 25 years, the payment would rise from $4,143 to $5,013 a month. A three-month basement vacancy would cost $5,700.

What this case teaches: the house hack needs the least cash and the tenant covers about a third of the house’s costs. But with 7% down, a modest price fall leaves no equity, so the owner must be able to stay put. It is a housing decision first and an investment second. Owner-occupied units also raise principal residence questions: see rental income tax.

Case C: value-add with a new legal unit in Brampton

Hypothetical example

An investor buys a dated bungalow, renovates it, adds a registered basement unit, rents both units, then refinances to 80% of the new appraised value. The step-by-step process is in the value-add and BRRRR guide.

Assumptions and financing

Year one after refinance

Gross rent $61,200, less $1,836 vacancy and $15,260 of costs, gives net operating income of $44,104, a 4.41% cap rate on the appraised value. After $53,133 of mortgage payments, cash flow is −$9,029 a year (−$752 a month).

Five years later

Rent grows 2.5% a year and costs 3% a year in the first two columns. The downside assumes the appraisal came in at $920,000, the renovation ran 25% over and took eight months. That leaves $271,882 in the deal, with a $736,000 refinance. It then assumes no rent growth, one month vacant each year, and a sale at $874,000.

What this case teaches: the renovation created most of the gain in the base cases, which is why it holds up even with flat prices. But it depends on three things going right at once: cost, schedule and appraisal. When they go wrong, far more cash stays trapped and the result turns sharply negative.

The three cases side by side

Case B’s figures compare sale proceeds with cash invested. They ignore the rent the owner would otherwise pay to live elsewhere, so they understate its value as housing.

What the three cases teach

• At these assumed prices and rates, monthly cash flow is negative in all three. Plan to fund it.
• Five years is short. Selling costs and a flat market can erase most of the principal repaid.
• The downside is always a large loss. Your reserve and holding power decide whether you ever realize it.
• Equity you create, through a legal unit or a well-priced renovation, is more dependable than equity you hope the market gives you.
• Taxes are not included and will reduce every positive result.

Ready to see where you stand? Use the first investment checklist, and read legal basement investments before buying any property with a second unit.

Questions about these case studies

Sources

• Ontario.ca: calculating land transfer tax and first-time homebuyer refunds
• CMHC: mortgage loan insurance premiums and purchase insurance eligibility (owner-occupied 1 to 4 units)
• Financial Consumer Agency of Canada: down payments
• CMHC: 2025 Rental Market Report (GTA condo two-bedroom average rent)
• Ontario.ca: rent increase guideline (post-2018 exemption)
• OSFI Guideline B-20 (80% conventional limit)
• TRREB Market Watch, September 2026 (historic annual average prices, January to September 2026 average)
• TRREB Market Watch, December 2025 (2025 annual average price)