ImmoMulti — direct buyer of multiplex income properties on the North Shore — says it plainly: the cap rate (capitalization rate) listed in a plex ad is one of the most misleading numbers on the market. It's presented as an objective fact — "6% cap rate" — when it's almost always built on optimized income and incomplete expenses. In a market where the median plex price in the Montreal area still rose 6% year-over-year in May 2026 according to the APCIQ, the temptation to inflate that number has never been stronger. Our message to buyers: this cap rate isn't data, it's a sales pitch.
Quick answer
The listed cap rate is often inflated two ways: through "potential" income (market rents instead of the actual lease rents) and through understated expenses (no vacancy, management, maintenance or replacement reserve). A listed cap rate of 6% can fall to 4% once recalculated with real numbers. Never make an offer on the ad's cap rate: rebuild the net operating income from the leases and recalculate the cap rate yourself.
Opinion column by the ImmoMulti Team. Facts are sourced; the opinions are our own. This text is not tax, financial or legal advice.
🔥 Our take
Here's our position, no sugar-coating: a cap rate listed in a plex ad should never serve as the basis for a purchase offer. That number is produced by the party who benefits from selling at the highest possible price. It's calculated "in the seller's favour" — income pulled up, expenses pushed down — and the result is a cap rate that flatters the building without describing its economic reality. A buyer who takes it at face value pays a premium for a return that exists only on paper. The only cap rate that matters is the one you recalculate from the actual rents and a complete expense budget.
"Potential" income: the first lie
The first sleight of hand is on income. A listing will happily show the "potential income" or "market income": what the building could earn if every rent were pushed to market level. Except you're not buying a hypothetical building — you're buying current leases, with actual rents, often well below market, and capped by the TAT rent-setting method. You can't simply "reset to market" at the first opportunity.
A plex whose ad shows $60,000 in "potential" income may only generate $48,000 in real income. On an $800,000 price, that $12,000 income gap swings the cap rate by several points. It's a completely different building — and yet it's the same ad.
This isn't always bad faith. The OACIQ requires the listing broker to verify information before publishing it: if something on the descriptive sheet appears incomplete, missing or erroneous, it must be verified, and the seller undertakes to provide the leases and financial statements establishing income and expenses. But the distinction between "verified actual income" and "projected potential income" escapes many rushed buyers.
Source: OACIQ — broker verification duties and seller declarations.
The buried expenses: the second
The second bias is more insidious: what doesn't appear in the calculation. A listing will show taxes and insurance — hard to hide — but readily bury the items that truly weigh on net operating income. These omissions inflate the NOI, and therefore the cap rate.
| Item often omitted | Effect on the listed cap rate |
|---|---|
| Vacancy and bad debt | Inflates income (assumes 100% leased, 100% paid) |
| Management fees | Ignores the value of your time or a manager |
| Routine maintenance | Understates recurring repairs |
| Replacement reserve | Ignores roof, windows, heating, cladding |
| Energy (if owner heats) | Sometimes excluded to flatter the net |
Add these items up and the net income melts away. This is exactly the mechanism our guide to a plex's economic value details: a cap rate is only reliable if the NOI feeding it is complete. A seller who "forgets" $8,000 of annual expenses on an $800,000 building conjures up a point of cap rate that doesn't exist.
The "net-net" trap
Be wary of listings that show a "net income" without detailing which expenses are included. A net without a replacement reserve or vacancy allowance is not a true net: it's a marketing figure. Demand the breakdown, line by line, before converting anything into a cap rate.
Recalculate, don't take it on faith
Here's the core of our opinion, and our most useful advice: treat the listed cap rate as a hypothesis to disprove, not a fact to accept. Gather your ammunition and redo the math.
Documents to demand before turning a cap rate into an offer
- The current leases — for actual rents, not "potential" ones
- The rent roll and the history of increases
- Up-to-date tax bills (municipal and school)
- Actual insurance premiums (sharply higher recently)
- The energy bills if the owner pays for heating
- The maintenance history and any major work coming up
- The real vacancy rate for the area
With these documents, rebuild a credible NOI, divide by the asking price, and compare the resulting cap rate to the average cap rate observed in the same North Shore area. It's that comparison — not the ad's figure — that tells you whether the price is justified. A real cap rate of 4.2% in an area where comparable plexes trade around 5% signals an overpriced building, no matter what the listing promises.
🎭 Devil's advocate
Let's be honest: our thesis deserves some nuance.
First, not every seller cheats. Many brokers present rigorous numbers, clearly separate actual from potential income, and provide complete financial statements. A "potential" cap rate clearly labelled as such isn't dishonest: it's useful information for a buyer who plans to raise rents legally. Demonizing every listing number would be unfair to the serious professionals who honour their verification duties.
Second, we have to admit that potential income has real value for some investors. If you buy a plex whose rents are far below market, that "potential" is precisely your investment thesis — provided you're realistic about the time and regulatory constraints to realize it. Ignoring potential entirely sometimes means missing the real opportunity, as we explain in our take on turnkey vs value-add.
Finally, from the seller's side, showing a property in its best light is legitimate — it's what any seller of any asset does. The responsibility for verification also rests with the buyer. Blaming a seller for being optimistic is a bit like complaining that water is wet.
The verdict
Having weighed both sides, here's where we land. The listed cap rate isn't the devil, but it isn't the truth either: it's a starting point, never a finish line. Take it as an invitation to ask questions, not as an answer. A serious seller will hand over leases, taxes, insurance and maintenance history without hesitation — their transparency is itself a signal. A seller who balks at detailing the numbers tells you the essentials without meaning to.
Our rule for a North Shore plex buyer: never sign an offer on a cap rate you haven't recalculated yourself, with real rents and complete expenses in hand. It's the same reflex as sizing up a neighbourhood — look at the real indicators, not the storefront, the way our guide on properties sold below economic value shows. And if you'd rather skip the whole theatre of optimized listings, a direct off-market transfer gives you the real numbers from the start.
ImmoMulti: direct buyer of multiplex income properties on the North Shore
Selling a plex and want to avoid the numbers games? We analyze your actual statements and submit a direct offer, commission-free and confidential — no public listing, no broker, no obligation. Get a proposal within 48 h.
To go further, our offer calculator helps you translate a real NOI into a defensible price, and our guide to a plex's economic value breaks down the mechanics item by item. Two tools built to turn an attractive ad into a number-driven decision.
