One of the most common questions we get is, “What kind of return should I expect from investing in an apartment building?” The honest answer is that there’s no single number. Every building is different, and every deal has its own targeted return. “Targeted” is the key word, because you never know the final return until the property is sold. Still, there are a few building blocks you can use to judge what a reasonable return looks like.
- Mortgage paydown: Every month you pay down part of the mortgage, building your equity. This on average adds 4–7% per year, depending on the size of the mortgage and the interest rate.
- Appreciation: Property prices generally rise over time. In Canada, appreciation has averaged roughly 3–5% per year since 2000, depending on the region.
- Cash flow: The money left after all expenses and the mortgage are paid. We buy for cash flow and aim for 5% or higher, so the investment is protected if the market dips.
“Long-term thinking changes your short-term actions. Build what lasts.”
— James Clear, author of Atomic Habits
Put those together with conservative assumptions and “good” returns are not unreasonable to over a 5–10 year hold. Our properties have historical returns of 20% or more, but like any investment, returns are never guaranteed and aren’t fully realized until the property sells. What often matters more than the percentage are the benefits that don’t show up in the number:
- Protection from inflation: As the cost of living rises, rents tend to rise with it. Slow and steady wins the race, and over time real estate keeps building up steam.
- Lower volatility: Stocks can be bought and sold in an instant, so their prices can swing wildly in a single day. Selling a building takes months, which slows down changes in rents and property values. When the market shifts, there’s more time to adjust.