Rent vs Buy — Investor Edition (Canada)

A consumer rent-vs-buy calculator asks whether you should buy the home you live in instead of renting it. This is the investor version: it asks whether buying a rental property to let out beats simply investing the same capital somewhere else. The question isn't housing — it's what your money should be doing. That makes the opportunity cost of your down payment the central variable rather than an afterthought.

It's the return your down payment would have earned if you hadn't tied it up in a property. A rental that returns 6% a year isn't obviously good or bad in isolation — it depends entirely on what else that capital could have done. If an alternative investment would have returned 8%, the property is destroying value relative to the alternative despite showing a positive return. Most rental calculators ignore this comparison entirely.

Leverage. When you put 25% down, your appreciation compounds on the full property value, not just the capital you contributed — so 3% appreciation on the whole asset is roughly 12% on your down payment before costs. Add tenant-funded mortgage paydown, which quietly converts debt into equity, and property can beat an unlevered alternative even with modest yields. The flip side is that leverage magnifies losses just as efficiently.

Both paths compound at the same alternative rate. The property path reinvests each year's positive cash flow at that rate; the alternative path receives not just the initial capital but also any money you'd have spent covering the property's negative cash flow. Without that symmetry the comparison would quietly flatter one side — a common flaw in property-versus-market arguments.

Real estate carries heavy transaction costs — several percent to buy and several more to sell — which punish short holds badly. An index fund has almost none. But over a long hold, leverage, mortgage paydown, and rent growth compound in property's favour while those one-time costs amortise away. The answer frequently flips somewhere in the middle, which is why it's worth testing several horizons rather than trusting a single number.

No — it's a pre-tax comparison. Tax treatment varies enormously by investor and jurisdiction: depreciation, how rental losses offset other income, capital gains on sale, and the tax on investment gains all depend on personal circumstances. Modelling it generically would create false precision. Use the dedicated depreciation and capital-gains tools for the tax layer, and speak to a professional.