MBL Developments · Published 2026-08-09 · All insights
How Much Can You Pay for a Toronto Sixplex Lot? The Max-Bid Formula, Worked
The short answer: the most a lot is worth to a rental developer is its finished building's value minus everything it costs to create that value — solved backwards. Worked at typical Toronto numbers below: a ~$3.26M finished value supports ~$2.86M of total project cost at a 1.20 coverage discipline, non-land costs consume ~$2.2–2.3M of that, and the land can carry roughly $560–660k. If the ask is higher, the deal only works with better rents, cheaper construction — or someone else's optimism.
Updated August 2026 · MBL Developments Research · Every figure below is illustrative; run your own lot through the same chain.
The formula, in one chain
Closed rents → NOI → value → supportable cost → minus non-land costs → maximum land bid.
Nothing exotic — the discipline is in running it before you fall in love with an address, and using closed data at every step.
Worked example — a typical Toronto 30-ft lot
| Step | Line | Illustrative value |
|---|---|---|
| 1 | Six-unit rent roll at pocket's closed medians (see our benchmark) | ~$18,500/mo |
| 2 | Vacancy 2% · operating expenses 25% | — |
| 3 | Stabilized NOI | ~$163,000 |
| 4 | Value at a 5.0% cap — the very worst end of the observed 4.2–5.0% trade range | ~$3.26M |
| 5 | Loan the NOI supports at a 1.20 coverage discipline (50-yr amortization, ~5.0% annual mortgage constant — i.e., $163k ÷ 1.20 ÷ 0.0499) | ~$2.72M |
| 6 | Total project cost the loan supports at the 95% LTC maximum (the ceiling — coverage can bind first and lower it) | ~$2.86M |
| 7 | Non-land costs: construction (~5,900 sf @ $290–310), softs, insurance premium + PST, financing, contingency | ~$2.2–2.3M |
| 8 | Maximum land bid | ~$560–660k |
Run the same lot with illustrative pocket rents (~$21,500/mo) and the max bid climbs past $1.1M. Same formula, different evidence — the rents set the land price, not the neighbours' asks.
The three sensitivities that matter
- Rents ±$500/mo across the total roll moves the max bid by roughly ±$75–80k (each ±$100/mo of roll ≈ ±$15k of land). Miss by $500 on every market unit and the swing is 4–5× that — which is why underwriting on asking prices, or hope, is fatal.
- Construction ±$15/sf moves it ~$90k. A real fixed-price contract is worth more than a cheap estimate.
- Coverage discipline: we solve at 1.20× even where the insured floor is lower — the gap is the margin for being wrong.
What we deliberately did not publish
Our own per-pocket ceilings and the exact constants in our model stay internal — they're the business. But the method above is complete: with our published rent benchmark and cost guidance, you can run any Toronto lot through this chain in an afternoon. Most lots fail. That's the point.
Frequently asked questions
Why cap value at 5.0% when trades print 4.2–5.0%? Because 5.0% is the worst end of the observed range — conservatism you can defend beats optimism you have to. Underwrite at the weakest observed print; let better ones be upside.
What about appreciation? Not in the formula. If the deal needs appreciation to pencil, it isn't a deal — it's a forecast.
Does this work for fourplexes or other cities? The chain is universal; the constants aren't. Rebuild every input from local closed data.
the MBL underwriting & development program → — our program and Deal Lab walks this exact process end to end on a complete sample project, with the underwriting templates included. Join the waitlist on the program page.