Your Rent Goes Up. Your Mortgage Does Not. That Is the Whole Trick.

Inflation raises a rental’s rent and running costs, but not the mortgage payment on the same debt. So the cash flow, the part left over, can grow much faster than the rent. At 3 percent a year for ten years, a rental earning $200 a month earns about $406. It depends on two things holding: rent being allowed to rise, and the payment not jumping at renewal.

Last updated: September 2026

Cash flow growth in ten years when rent rises 3% a year and the mortgage stays put

2.1%

Ontario’s 2026 rent increase guideline for most pre-2018 units

25%

Return on cash from a 5% price move with 20% down, before costs

I had Scott Gannon on the podcast. He works with business owners on protecting the money they have already made, so I asked him the obvious question: of all the wealthy clients he has worked with, what actually beat inflation? His answer was not gold, and it was not Bitcoin.

Real estate rents is a great example of that. You can actually benefit from inflation if you’re not in a rent-controlled environment.

Scott Gannon, Magnify Wealth

Then he walked through a piece of math that I think every would-be landlord should see once. It is simple, and it explains more about why people own rental property than anything I could say about appreciation.

How does inflation grow a rental’s cash flow?

Take a rental that brings in $1,000 a month. Scott’s split: 40 percent goes to expenses (taxes, insurance, maintenance, fees), 40 percent goes to the mortgage, and 20 percent, $200, is left over.

Now let ten years of inflation go by. Rent rises. Expenses rise with it. But the mortgage payment is on money you already borrowed, and it does not care what eggs cost now.

Scott Gannon of Magnify Wealth explaining on the Supply and Demand podcast how rental cash flow grows when rent rises and the mortgage payment stays fixed

Scott used rent doubling in ten years, which makes the point loudly: the $200 becomes $800. Four times the cash flow from the same building. But doubling in a decade takes about 7.2 percent a year, which is a lot. So here is the same example at more ordinary rates.

Rent growth per year	Rent in 10 years	Expenses (40%)	Mortgage	Monthly cash flow
Today	$1,000	$400	$400	$200
2.1% (Ontario 2026 guideline)	$1,231	$492	$400	$339 (1.7x)
3%	$1,344	$538	$400	$406 (2x)
7.2% (Scott’s example)	$2,004	$802	$400	$803 (4x)

Even at the rent guideline, the cash flow grows about 70 percent while the rent grows about 23 percent. That gap is the whole trick. The fixed payment is the lever.

Three ways a rental pays you

Cash flow

What is left each month after expenses and the mortgage. The table above.

Principal paydown

Part of every mortgage payment reduces the loan, and the tenant’s rent is funding it.

Appreciation, multiplied by leverage

If the property rises in value, your return is measured on your down payment, not the full price.

What does leverage do to a return?

On the podcast I put it in numbers. Buy a $500,000 condo with $100,000 down. Assume it only breaks even each month, so there is no cash flow at all. If it goes up 5 percent, that is $25,000. You did not make 5 percent on your money. You made 25 percent, because you only put in $100,000.

Adam Nadler walking through how a 20 percent down payment turns a 5 percent rise in a condo's value into a 25 percent return on cash

Leverage works in both directions

The same math on a 5 percent drop is a $25,000 loss, 25 percent of your cash, gone. GTA condo prices have fallen meaningfully from their peak, so this is not hypothetical. Leverage rewards patience and punishes being forced to sell at the wrong time.

Where the math breaks

Scott’s example is right about the mechanism. It also rests on assumptions that do not always hold in Ontario, and I would not be doing my job if I skipped them.

Rent control caps the top line. Most units first occupied before November 15, 2018 are held to the guideline, 2.1 percent in 2026. Newer units are generally exempt, with increases limited to once every 12 months on 90 days notice.
The mortgage is only fixed until renewal. Renew at a higher rate and the “$400” is not $400 anymore. Stress test it before you buy.
GTA rents are falling right now. A wave of condo completions pushed rents down year over year into 2026. This is a ten-year argument, not a next-lease one.
Expenses do not always rise politely. A special assessment or a new roof can erase years of cash flow growth in one bill.

Scott made a point about rent control that stuck with me. Nova Scotia capped rent increases during the pandemic while grocery prices climbed. Nobody capped eggs. If you did, you would get fewer eggs. Cap what housing can earn, and over time you get less of it. I think that is right, and it is also why the math above is a long-run argument, not a guarantee.

The rent is not the investment. The gap between the rent and a payment that does not move is.

What I would take from this

Judge a rental on the gap, not the rent. Rent minus expenses minus the payment, and how that gap behaves over ten years.
Know which rent rules apply to the unit before you model any growth at all.
Model the renewal, not just the first term.
Only use leverage you can hold through a bad year. The math only pays people who are still holding the property when it does.

Sources: Government of Ontario, Residential rent increases (2026 guideline of 2.1 percent and the exemption for units first occupied after November 15, 2018). Rental example from Scott Gannon on Supply and Demand; ten-year figures compounded annually and rounded. Illustrative only, not financial advice.

Watch the Full Episode

My full conversation with Scott Gannon, including money, inflation, development charges and what a real tax rate adds up to, is on Supply and Demand.

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Frequently Asked Questions

Does inflation help landlords?

It can. Rent and operating costs tend to rise with inflation while the mortgage payment on the same debt stays roughly fixed, so the gap between them, the cash flow, can grow faster than the rent itself. It only works if rent can actually rise and the financing cost does not jump at renewal.

How much can I raise the rent in Ontario in 2026?

The 2026 Ontario rent increase guideline is 2.1 percent for most units. Units first occupied for residential purposes after November 15, 2018 are generally exempt from the guideline, though increases are still limited to once every 12 months with 90 days written notice.

What does leverage do to a real estate return?

It multiplies it in both directions. With $100,000 down on a $500,000 condo, a 5 percent rise in value is $25,000, a 25 percent gain on your cash before costs. A 5 percent fall is a $25,000 loss, the same 25 percent the other way.

Are GTA rents going up right now?

Not at the moment. GTA rents fell year over year into 2026 as a wave of condo completions hit the rental market. The inflation argument is about the long run, measured in a decade, not the next lease.

Does my mortgage payment really stay the same?

Only within a fixed term. At renewal the rate resets to whatever the market is charging, which can raise the payment. That is the single biggest assumption in the rental example, and it is worth stress testing before you buy.

Your Rent Goes Up. Your Mortgage Does Not. That Is the Whole Trick.

Your Rent Goes Up. Your Mortgage Does Not. That Is the Whole Trick.

How does inflation grow a rental’s cash flow?

Three ways a rental pays you

What does leverage do to a return?

Where the math breaks

What I would take from this

Watch the Full Episode

Frequently Asked Questions

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