Edmonton rental property investing
What a rental actually earns, what the arithmetic leaves out, and the ownership questions worth settling before you offer.
What an Edmonton rental actually earns
Rent, minus the months it sits empty, minus the payment on your actual terms, is the month a rental leaves you — not a rule of thumb, arithmetic on your own price, rent and financing. Cap rate measures what the building earns against what it costs, before any financing, so two properties compare on the same footing; cash-on-cash measures a year of cash flow against the money you actually put in.
None of that is a projection of what you would personally earn — it is the ledger for a property, run on the numbers you give it. The calculator does the arithmetic while you type.
The costs the arithmetic leaves out
A cash-flow figure that quietly omits insurance and maintenance is not a conservative estimate, it is a wrong one. The calculator does not add in landlord insurance, the furnace that goes at Christmas, the turnover paint, or 8-10% of rent if someone else is managing the property. It does not add in the utilities you cover rather than the tenant, or the mortgage default insurance premium that applies under 20% down. And it does not add in what it costs to get to a tenant in the first place — closing costs, legal, inspection, and the money a unit needs before anyone will pay to live in it.
One thing it leaves out cuts the other way: principal paydown. Every payment buys down the loan, and that is not the same thing as cash flow.
The questions to settle before you offer
This is not tax advice; confirm anything here with your accountant before you act on it.
Anyone can hand you a calculator. The part that costs real money tends to be decided before the offer goes in, and it is not arithmetic: GST on a new build, whose name goes on title, and what a rental does to your return. I work in corporate tax, and I raise these before an offer goes in, while they are still cheap to fix. I raise the question. A CPA answers it.
Common questions
This is not tax advice; confirm anything here with your accountant before you act on it.
- How much do I need for a down payment on an Edmonton rental?
- There is no single number this page will give you. The cash-flow calculator on this site starts at 20% down, and the mortgage payment, the monthly cash flow and the cash-on-cash figure move with that field, so try your own down payment there before anything else. What a lender will actually require on a rental is a question to settle with the lender, in writing, before you offer.
- What is a realistic vacancy allowance in Edmonton?
- The calculator’s default assumes 4% of rent sits empty over a year — a couple of weeks between tenants, not a bad year. It is a starting assumption, not a guarantee: change it on the calculator to see what a longer or shorter vacancy does to the month.
- What is a good cap rate on an Edmonton rental?
- Cap rate is what a building earns against what it costs, before any financing — which is what makes it useful for comparing two properties on the same footing regardless of how either is financed. There is no single number that counts as good across every property and every buyer’s goals, and this page will not invent one; run your own price and rent through the calculator and compare the result against the other properties you are actually weighing.
- Does a legal secondary suite change the numbers?
- The calculator has one rent field, so a suite’s rent has to be added into that single number by hand — the arithmetic does not model a second unit on its own. Whether the suite is legally registered is a separate question from the arithmetic entirely, and it is worth settling before you count on that income rather than after.
- Do I pay GST when I buy a new-build rental in Alberta?
- A new or substantially renovated property drags GST into the purchase, and how it gets treated depends on how the property will be used and who holds it. That is a question for before the offer goes in, not for closing week — I raise it, a CPA answers it.
- Should the property be in my name or a corporation?
- Personally, jointly, or through a corporation changes how the rent is taxed, what a lender will lend against, and what the year you sell looks like. Deciding it now costs a conversation; changing it later costs a great deal more — I flag the question, and a CPA answers it.
- Is there a land transfer tax in Alberta?
- No — Alberta does not charge a land transfer tax on a purchase. That does not mean there is nothing to budget for at closing: legal fees, inspection, and the money a unit needs before anyone will pay to live in it are real costs this page’s arithmetic does not add in for you.
- What does a property manager cost, and is it worth it?
- Budget 8-10% of rent if someone else is managing the property — that figure comes straight off the top of the cash flow the calculator shows you, so it is worth adding in before you decide the number works. Whether it is worth paying is a question of your own time and how many doors you are running, not one this page can answer for you.
- What does this site’s cash-flow calculator leave out?
- Insurance, maintenance, management, and the utilities you cover rather than the tenant; mortgage default insurance if you are under 20% down; what it costs to get a unit ready for a tenant — closing costs, legal, inspection; and principal paydown, which cuts in your favour and is not the same thing as cash flow. The mortgage payment itself is also an estimate: it compounds monthly, and a real Canadian lender compounds semi-annually, so an actual payment on the same numbers comes out a few dollars lower.
Where to start
Run the numbers on the calculator, or get the starter kit and a personal follow-up on the property you are weighing.
For this month’s prices and sales, see the Edmonton housing market update.
Omar Abubaha is a licensed real estate associate with Sable Realty in Edmonton, Alberta. He works in corporate tax, and he serves buyers, sellers and investors in Edmonton, St. Albert and Sherwood Park.