In our $425,000 London duplex example, you’d need about $3,442–$3,553 in combined monthly rent to keep $500–$600 before income tax. That assumes 20% down, a 5% mortgage rate, and the costs shown below. For a property you’re considering, I’d run the numbers with rent you can verify, the costs you’d pay as the owner and a mortgage quote from your lender.
With $400,000 to $500,000 to spend, should you buy a residential rental or a small commercial unit? Start with the rent the property can actually earn and work backwards from what you want to keep.
Here, cash flow means the money left after operating costs, reserves and the full mortgage payment, before income tax. It’s an average across the year. Some months will be better than others.
Where I’d look with a $400K–$500K budget
In October 2026, the London and St. Thomas Association of REALTORS® reported an average sale price of $596,951 for London overall, $484,749 in London East and $513,697 in St. Thomas. London North averaged $655,236. Those averages cover the mix of homes sold. They don’t tell us what a legal duplex costs or whether one is available in the budget. I’d compare recent sales of legal two-unit properties in London and nearby areas before choosing where to focus the search.
On the rental side, CMHC’s 2025 Rental Market Report recorded 4.0% vacancy and an average two-bedroom rent of $1,651 in the London metro area’s purpose-built apartment market. That’s useful context, but it includes occupied units and doesn’t price a particular house or suite. For an offer, I’d use the current signed leases and compare recently leased units with similar condition, parking and utility arrangements.
What the residential numbers look like
Say you buy for $425,000, put $85,000 down and borrow $340,000 at an illustrative 5.0% fixed rate over 25 years. The mortgage is about $1,977/month. Use a current lender quote when you assess a real property. In this example, budget $620/month for property tax, insurance, management and other owner expenses, plus 5% of gross rent for vacancy and 5% for maintenance. The examples use the same expense assumptions to show what changes when you have a second rent. A real duplex may cost more to operate. The price and rents are inputs chosen to show the math; they aren’t drawn from a sale or signed leases.
Illustrative monthly numbers. These are scenarios, not listings or rent estimates.
| Monthly item | One rental | Two legal units |
|---|---|---|
| Gross rent | $2,350 | $3,550 |
| Vacancy and maintenance | −$235 | −$355 |
| Other operating costs | −$620 | −$620 |
| Mortgage payment | −$1,977 | −$1,977 |
| Cash flow before income tax | −$482 | +$598 |
Under those assumptions, you’d need about $3,442–$3,553/month in total gross rent to keep $500–$600. If owner costs run $100 higher each month, the two-unit example drops to $498. If rent comes in 5% lower, it drops to about $438. If you combine that lower rent with a mortgage rate one percentage point higher, such as when testing a renewal, it drops to about $240/month. The $85,000 down payment also excludes land transfer tax, legal fees, inspections, initial repairs and cash reserves. Confirm the financing terms and cash needed at closing with your lender.
Before counting a second unit, confirm its legal status and permits. A rented duplex in London generally needs a rental licence, and new applications involve inspections. Check the rules for the specific property and municipality. For a unit you’d have to build, budget for the permits, construction and months before rent starts. If there are tenants in place, use their documented rents and check Ontario’s rent rules before assuming an increase.
When a small commercial unit could make sense
Consider a small retail, office or industrial unit if it has a tenant who pays on time, a lease with enough term remaining and a space another business could use. A net lease may pass some costs to the tenant, but the signed lease spells out who pays what. Look for upcoming renewals, responsibility for big repairs, and expenses you’d have to cover during a vacancy. Ask your lawyer to review the lease and your accountant about GST/HST on the purchase and rent.
For example, at $450,000 with 30% down ($135,000 before closing costs), a $315,000 loan at an illustrative 6.5% over 20 years would cost about $2,333/month using semi-annual compounding for this illustration. The example assumes $3,750/month in base rent, or $45,000 a year. That’s 10% of the purchase price before any costs, an assumption for the example rather than a market benchmark. Allow for one vacant month a year ($313/month averaged over the year), $300/month in owner costs after recoveries, and $250/month for future leasing and major repairs. That leaves about $555/month before income tax. One additional vacant month brings it down to about $242/month, even before any extra costs you pick up while the unit is empty.
Those are sample loan terms and a sample lease, not a rate quote or a rent forecast. For commercial property, ask the lender for the actual payment and how it is calculated, and have your advisor model the lease, recoveries, vacancy and any costs to get a new tenant in. Rental Deal Check is a starting point for a home or duplex.
What I’d do before making an offer
I’d compare a few legal two-unit properties first. For each one, I’d verify the leases or recently leased comparables, then replace these example costs with the actual tax bill, insurance quote, owner-paid utilities and a realistic repair reserve. If a commercial unit stands out, I’d compare it with the best residential option using the actual lease and lender terms. If a deal only reaches $500 with full occupancy and no surprises, I’d keep looking.
London listings up to $600,000
Browse properties for sale across London, or narrow your search to multifamily or commercial listings. If you’re working with the $400,000 to $500,000 budget in this guide, set the maximum to $500,000 on the results page.
The multifamily search can also show triplexes and larger properties, and it may miss homes with a second unit listed as detached. Verify that both units are legal and confirm the current rents and costs before using them in your cash-flow estimate.
For commercial results, check whether the asking price is for the real estate and whether a lease is in place.
Have a property in mind? Send me the listing and we can go through the rent, the costs and the cash you’d need to close.
