Every building for sale comes with a story. Underneath the story are two documents — the rent roll and the operating statement — and once you can read them, you can price any building in the country on the back of an envelope. This lesson teaches you the five numbers that matter and where sellers hide the soft spots.
The rent roll is the building’s income, unit by unit: who pays what, since when, on what lease. Two things to read in it. First, the total — obviously. Second, and more valuably: the gap between what sitting tenants pay and what units rent for today in that market. Lesson 1 told you every dollar of new annual income is roughly twenty dollars of value at a 5% cap; the rent roll is where you find those dollars, sitting in plain sight, labeled “long-term tenant.”
The operating statement is everything it costs to run: property taxes, insurance, utilities, maintenance, management, and the small print. Here’s where stories live. A seller’s statement might show suspiciously low maintenance (deferred, not absent), no management fee (they self-managed — you’ll pay one, and lenders will underwrite as if you do), or last year’s insurance premium (get a current quote). Buyers rebuild this statement with honest numbers before believing anything. So will you.
The five numbers, in order:
- Gross rental income — the rent roll’s annual total, plus laundry, parking, storage.
- Vacancy allowance — nobody collects 100% forever; underwrite a market-appropriate percentage off the top even if the building is full today.
- Operating expenses — the rebuilt-honest version. In Ontario walkups these commonly land around 35–45% of gross income depending on who pays utilities; a statement showing 25% is a story, not a building.
- Net operating income — line 1 minus lines 2 and 3. The number the entire asset class is priced on. Note what’s not in it: mortgage payments. NOI describes the building, not your financing.
- The cap rate — NOI divided by asking price. Now you can compare a six-plex in Belleville against a twelve-unit in Windsor against anything else, on one number, the way every professional buyer does.
That’s the whole literacy. Value = NOI ÷ cap rate, and now you can compute both sides of it from documents any listing broker will send you.
Homework: find any public multi-family listing — five units or more, anywhere in Ontario. Pull the claimed income and expenses from the listing or brochure, compute NOI yourself, divide by asking price, and see what cap rate the seller is really asking you to pay. Then look for the story: what expense line looks too small? First time takes twenty minutes. Tenth time takes four.
Next: the financing framework that makes all of this reachable — and why the building qualifying instead of you changes who gets to own these.
Go deeper → How to read a listing
Education, not advice. Expense benchmarks are general observations, not underwriting guidance for any specific property.