Introduction: Real Estate Investing is a Numbers Game
Many first-time multi-family investors ask the same question: How do I know if a property is a good deal? The truth is, it comes down to a few key metrics. Once you learn how to calculate them, you can quickly separate opportunities from traps.
Let’s walk through an analysis of a 10-unit Edmonton apartment building, using real-world assumptions.
Step 1: Calculate Income
Assume rents are slightly higher in this building, say $1,200/unit (some buildings in central Edmonton can command this).
- Monthly Rent: $1,200 × 10 = $12,000
- Annual Gross Rent: $144,000
Vacancy adjustment (5%): $144,000 – $7,200 = $136,800 effective rental income
Step 2: Budget for Operating Expenses
Here’s a realistic breakdown for Edmonton:
- Property Taxes: $20,000
- Insurance: $7,000
- Utilities (landlord-paid): $12,000
- Maintenance & Repairs: $14,000
- Property Management: $14,000
Total: $67,000
Step 3: NOI (Net Operating Income)
- Effective Rental Income: $136,800
- Expenses: $67,000
= $69,800 NOI
Step 4: Core Investment Metrics
Cap Rate
If the purchase price is $950,000:
Cap Rate = $69,800 ÷ $950,000 = 7.3%
GRM
= $950,000 ÷ $144,000 = 6.6
Cash Flow
Financed with 25% down ($237,500), mortgage $712,500 @ 5%/25 years:
Annual debt service ≈ $50,300
Cash Flow = $69,800 – $50,300 = $19,500 annual profit (~$1,625/month)
Step 5: What These Numbers Mean
- Cap Rate of 7–8%: Shows the deal is generating strong income relative to price.
- GRM under 7: Suggests you’re buying at a favorable price per rent dollar.
- Positive Cash Flow: $1,600/month in passive income, while tenants pay down your mortgage.
Step 6: Edmonton-Specific Advantages
- Lower Cost Per Door: You can still find multi-family under $1M, rare in Canada.
- Resilient Rental Market: Steady demand from students, workers, and newcomers.
- Investor-Friendly Metrics: Double the cap rates of Toronto or Vancouver.
- Balanced Growth: Strong cash flow now + long-term appreciation potential.
Conclusion: A Blueprint for Decision-Making
Evaluating a 10-unit property isn’t about gut feelings; it’s about clarity. With:
- $69,800 NOI
- 7.3% cap rate
- $19,500 cash flow
This Edmonton example proves why disciplined investors are flocking to Alberta’s multi-family market. If you master these calculations, you’ll always know whether to buy, hold, or walk away.
