Cap Rates and Rent-to-Price in Ontario: How Markets Compare
Ask ten Ontario investors which city has the best returns and you will get ten answers. The way to settle it is with numbers. Two simple numbers do most of the work: rent-to-price and cap rate. This guide explains both, shows how Ontario markets compare, and walks through an example.
Rent-to-Price: The Quick Screen
Rent-to-price compares a property’s rent to what you pay for it. The most common version is gross yield.
- Gross yield = annual rent divided by purchase price.
A house bought for $400,000 that rents for $2,800 a month brings in $33,600 a year. That is a gross yield of 8.4%. The same rent on a $700,000 house is 4.8%.
Gross yield is fast and useful for comparing houses. But it ignores expenses. Taxes, insurance and repairs vary a lot by city and by house. So use it to screen, then move to cap rate.
You may hear about the “1% rule,” where monthly rent equals 1% of the price. In most of Ontario that is very hard to find on the open market. That is one reason investors look for off-market deals.
Cap Rate: The Better Number
Cap rate tells you what a property earns before any mortgage.
- Net operating income (NOI) = rent minus vacancy and operating costs. Operating costs include property tax, insurance, repairs, owner-paid utilities and management. They do not include mortgage payments.
- Cap rate = NOI divided by purchase price.
Because it leaves out financing, cap rate lets you compare a house in Windsor with one in Ottawa on equal terms. A higher cap rate means more income for each dollar you spend. It usually also means a market with slower price growth or more risk. A lower cap rate usually means buyers are paying for expected growth.
Our guide to analyzing an Ontario rental property also covers cash-on-cash return and debt coverage, which matter once you add a mortgage.
How Ontario Markets Compare
Here is a snapshot of recent figures for some key Ontario markets. Prices are 2025 year-to-date averages from the REMAX 2026 Housing Market Outlook. Vacancy rates are for purpose-built rentals from CMHC’s 2025 Rental Market Report. Rents are the latest figures we could find for each market.
| Market | Average sale price (2025) | Rental vacancy (2025) | Rent figure |
|---|---|---|---|
| Toronto | $1,074,978 | 3.0% | $1,969 avg 1-bed asking, Oct 2026 |
| Hamilton-Burlington | $783,254 | 3.6% | $1,619 avg 1-bed asking, Oct 2026 |
| Kitchener-Waterloo | $733,094 | not reported | $1,694 avg 1-bed asking, Oct 2026 |
| Ottawa | $700,839 | 3.0% | $1,809 avg 1-bed asking, Oct 2026 |
| Niagara | $676,670 | 3.9% | $1,527 avg 2-bed, 2025 |
| London | $640,886 | 4.0% | $1,518 avg 1-bed asking, Oct 2026 |
| Windsor | $573,548 | 3.7% | $1,454 avg 2-bed, 2025 |
| Sudbury | $507,476 | not reported | not reported |
| Thunder Bay | $386,184 | not reported | not reported |
Rent sources: liv.rent October 2026 Ontario rent report and CMHC 2025 Rental Market Report.
A few things stand out. Rents do not fall nearly as fast as prices as you move away from Toronto. A one-bedroom in London rents for about 77% of a Toronto one-bedroom. The average London house costs about 60% of a Toronto house. That gap is why cities like Windsor, London, Sudbury and Thunder Bay usually show higher yields.
Vacancy has also risen across Ontario as new rentals come online and population growth slows. Most of these markets sit in the 3 to 4% range. That is healthier for tenants and tighter for landlords than a few years ago. Build vacancy into every deal.
Why City Averages Can Mislead
Average sale prices mix every kind of home: condos, detached houses, new builds and fixer uppers. Rent figures are usually for apartments. So you cannot divide one by the other and get a real yield for a house.
What matters is the yield on the specific property you buy. A duplex in Windsor bought below market can produce a very different return from the city average. A detached house in Toronto with a legal basement suite can beat a plain single family home in a cheaper city. Always run the numbers on the actual property, with its actual rents and costs.
A Worked Example
Take a duplex with two units renting for $1,600 and $1,450 a month. That is $36,600 a year in gross rent.
- Less 4% vacancy: $35,136.
- Property tax: $4,800.
- Insurance: $2,400.
- Repairs and capital reserve: $3,600.
- Owner-paid utilities: $2,400.
- Net operating income: about $21,900.
Now look at what the buy price does to the return.
| Purchase price | Gross yield | Cap rate |
|---|---|---|
| $450,000 (listed price) | 8.1% | 4.9% |
| $390,000 (off-market price) | 9.4% | 5.6% |
The rent did not change. The house did not change. Buying $60,000 below the listed price added about 0.7 points to the cap rate. It also gives you equity from day one.
Run the same math on a Toronto house with a suite bought at around $1,075,000 and renting for $4,500 a month. After vacancy and higher costs, the cap rate lands near 3%. That can still make sense if you are betting on price growth. But it is a growth play, not an income play.
What This Means for Your Buying
- Pick your goal first. Income buyers tend to look at Windsor, London, Sudbury, Thunder Bay and parts of Hamilton and Niagara. Growth buyers often accept lower cap rates closer to Toronto.
- Use gross yield to screen and cap rate to decide.
- Price matters more than market. The same house is a better deal when you buy it right.
Our posts on positive cash flow properties in Ontario and the best Ontario cities to invest in go further on picking a market.
Join the Ontario Buyer List
We find off-market houses and multi-unit properties across Ontario, often below what a listed version would ask. When a deal fits your buy box, you hear about it first. It costs nothing to join.
See every market we cover on our Ontario off-market hub, including Windsor, London and Hamilton. For the full picture, read our guide to buying off-market investment properties in Canada.
This article is general information for investors and is not legal, tax, or financial advice. Market figures come from the sources named above and change often. The worked example uses illustrative numbers. Confirm rents, costs and value for any property with licensed Ontario professionals before you buy.