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Cap Rate, Rental Yield and Cash Flow on a Fraser Valley Condo

Before you buy a condo or townhouse to rent in Surrey, Langley or the Fraser Valley, work out 3 numbers: gross yield, cap rate and cash flow. Here is how, with a worked example on October 2026 prices and CMHC's latest rents, and every assumption labelled.

By Shawn Kandola, PREC · Published November 5, 2026 · 9 min read

3 numbers, 3 different questions

• Gross rental yield: a year's rent divided by the purchase price. It ignores costs, so it flatters every property.
• Cap rate (capitalization rate): net operating income divided by the price. Net operating income, or NOI, is rent after vacancy minus operating costs such as strata fees, property tax, insurance and repairs. It leaves the mortgage out, so you can compare properties however they are financed.
• Cash flow: NOI minus your mortgage payments. Divide a year's cash flow by the cash you put in and you have the cash-on-cash return.

The inputs, and where each one comes from

Rent is the hardest input. CMHC's Fraser Valley sub-area of the Vancouver CMA covers Delta, Surrey, White Rock, Langley City and Township, and Pitt Meadows and Maple Ridge. Its rented-condo rent is rated good rather than excellent quality, and it is an average of existing tenancies, not today's asking rents. The board's benchmark describes a typical apartment, not specifically a 2-bedroom, so a real 2-bedroom may cost more.

Picking the right rent

Use a rent from the right area and the right kind of building. CMHC's October 2025 average for a rented 2-bedroom condo across the whole Vancouver CMA was $2,900, which is $657 a month above the Fraser Valley sub-area's $2,243. Put the CMA figure into a Surrey purchase and the gross yield jumps to 7.7%, a number local rents do not support.

Rented condos also earn more than purpose-built rentals nearby. In the Fraser Valley sub-area a purpose-built 2-bedroom averaged $1,930, and CMHC rates the gap as statistically significant. Rented condos were scarcer too, with 1.4% vacancy against 3.6% for purpose-built apartments. About 30% of the sub-area's 61,771 condo apartments were rented out, so your unit competes with thousands of other investor-owned condos for tenants.

Step 1: gross yield

$2,243 x 12 = $26,916 a year. $26,916 / $453,600 = 5.93%.

Swap in CMHC's October 2025 average for a purpose-built 2-bedroom apartment in the Surrey zone, $1,858, and the same unit yields 4.92%. Which rent is realistic depends on the building, the finish and the season you lease it.

Step 2: net operating income and cap rate

If you paid cash, $18,385 a year is your return before income tax, about 4.1% of the price. Strata fees are 64% of the operating costs here, so every $100 a month of strata fee moves the cap rate by about 0.26 points. That is why the fee on Form B matters as much as the asking price.

Step 3: cash flow after the mortgage

Borrowing $362,880 at 4.5% over 25 years, compounded semi-annually as Canadian fixed-rate mortgages are, costs $2,008.44 a month, or $24,101 a year. NOI of $18,385 minus $24,101 leaves -$5,717 a year, about -$476 a month.

The cash you put in is $99,292: the $90,720 down payment, $7,072 of property transfer tax and an assumed $1,500 of legal and closing costs. That is a cash-on-cash return of -5.8%. In year 1 the payments also repay $8,087 of principal, so counting that, the return is +2.4% before any change in price. The rent that makes cash flow zero is about $2,739 a month.

The pattern is general: when the cap rate is below the rate you borrow at, each borrowed dollar costs more than it earns, and a bigger mortgage deepens the shortfall.

What moves the result

Townhouses usually yield less, because prices climb faster than rents. At the Surrey Central townhouse benchmark of $744,300, a rent of $2,555 a month, CMHC's October 2025 average for a purpose-built 2-bedroom townhouse in Surrey, is a 4.1% gross yield before strata fees, and CMHC found 10% of those townhouses vacant.

Rents are softening too. The Province's August 27, 2026 release, citing Rentals.ca, reported purpose-built asking rents down 7.6% in Langley and 12.4% in Abbotsford. A sitting tenant's rent can rise only 2.2% in 2027 under the Residential Tenancy Act rules for landlords, so a below-market lease stays below market for years.

Risks the cap rate does not show

• Vacancy tax. Surrey, both Langleys, Abbotsford, Chilliwack and Mission are in the speculation and vacancy tax area. For 2026 the rate is 1% of assessed value for Canadian citizens and permanent residents and 3% for foreign owners and untaxed worldwide earners, rising to 4% for them in 2027. A BC resident gets a $4,000 credit, so on a condo assessed at $453,600 the bill would be $536. Renting under a written tenancy of at least a month at a time, for at least 6 months of the year, exempts the property; the speculation and vacancy tax guide has the details.
• Federal flipping rule. Since January 1, 2023, profit on a home held less than 365 days is taxed as business income, not a capital gain, unless a listed life event applies, such as a death, a serious illness or a new job.
• BC home flipping tax. Since January 1, 2025, a separate provincial tax takes 20% of the net taxable profit on a home sold within 365 days, falling to zero at 730 days.
• Short-term rentals. In Surrey, both Langleys, Abbotsford, Chilliwack and Maple Ridge, short-term rentals are limited to the host's principal residence plus 1 secondary suite or accessory dwelling unit, so an investment condo cannot run as a nightly rental.
• Strata costs. Special levies and fee increases hit NOI directly; the Form B and depreciation report guide shows where to look for them.
• Renewal. Your rate is fixed only for the mortgage term, not the full 25 years.

Before you make an offer

When I run these numbers with an investor, the strata fee and a realistic rent decide most deals, so those 2 get checked before anything else. Browse condos and townhomes for sale in Surrey with the method in hand, or compare property types in condo vs townhouse vs duplex.

This is general information, not financial, tax or legal advice. Talk to an accountant about your own situation.

• The Form B: strata fee, special levies, bylaws and the reserve fund.
• If it is tenanted, the lease, the rent and the date of the last increase.
• The last property tax notice; the Surrey property tax guide explains the calculation.
• An insurance quote for a rented unit that covers the strata deductible.
• A mortgage quote, then rerun all 3 numbers.

Frequently asked questions