Start with a unit-by-unit audit: compare each rent to the market, quantify the total gap, then choose the legal lever that fits each unit. It's the first question almost every new income-property owner in Québec asks — and the good news is that the path is clear, quantifiable, and fully legal. The reflex to avoid? Trying to raise everything at once. You inherit the existing leases; value is unlocked by method, not by haste.
In this article
- Step 1 — Audit each unit (rent paid vs. market)
- Step 2 — Quantify the gap and the locked-in value
- Step 3 — Pick the right legal lever, unit by unit
- Step 4 — Respect the TAL's timelines and tenant protections
- Step 5 — Sequence your moves (cashflow, resale, refinancing)
- Worked example: a fourplex $450/door below market
- Where do you start, concretely?
Step 1 — Audit each unit (rent paid vs. market)
Before any move, draw an exact picture of your building, unit by unit. Pull the list of leases and note, for each unit: the rent paid, the lease renewal date, who is actually on the lease, and whether there have been assignments or sublets. That's your starting point: you can't optimize what you haven't measured.
Next, establish the market rent for each unit: compare it to equivalent units recently rented in the same area (type, size, condition, services included such as heating or parking). The gap between the rent paid and that market rent is the heart of everything that follows. Use this stage to spot the special situations that frame your options: a long-time senior tenant, a unit whose rent is very low because of successive assignments, a recently renewed lease. Each unit has its own reality.
Step 2 — Quantify the gap and the locked-in value
A rent gap isn't just missing income each month: it's locked-in property value. A rental property's value depends on the net income it generates, and is calculated like this:
The cap rate (capitalization rate) expresses the return the market expects. At a 5% cap rate, each additional dollar of annual net income multiplies value by 20 (since 1 ÷ 0.05 = 20).
In other words, a unit rented $300 below market doesn't just cost you $3,600 per year: it holds back roughly $72,000 in property value at a 5% cap rate. Add up the gaps of all the units and you get the total dormant value in your acquisition. That figure is what justifies each of the following moves — and tells you how profitable it is to invest in unlocking each unit.
Step 3 — Pick the right legal lever, unit by unit
There isn't a single tool, but three — and the right one depends on each unit, the gap at stake, and the tenant's situation. A well-optimized building often combines all three.
- A negotiated increase the tenant accepts (cash for raise). You propose an increase at renewal, backed by clear reasoning, that the tenant accepts by mutual consent. It's the gentlest lever, ideal when the gap is moderate and the tenant wants to stay. See our Cash for Raise service.
- A paid voluntary departure (cash for keys). You pay compensation so the tenant agrees to terminate the lease and leave. It's the lever for large gaps, when bringing the unit back to market creates value that far exceeds the compensation. Details: the complete cash for keys guide.
- Waiting for natural turnover. Some tenants will leave on their own in the coming months or years. For those units, the best strategy is sometimes patience: when they leave, you re-rent at market with no process and no compensation.
Key takeaway
None of these levers can be imposed on the tenant. You cannot raise the rent unilaterally or force a departure: the law protects a tenant in good standing. What works is an offer attractive enough that they see their own advantage in it — or simple patience.
Step 4 — Respect the TAL's timelines and tenant protections
This is the guardrail of the whole plan. When you buy, you inherit the leases: you take on the seller's rights and obligations, on the same terms. Concretely, that means:
- The existing leases continue as is until they expire. No increase applies before renewal, and it then follows the TAL's calculation method.
- Notices and timelines must be respected — renewal and modification notices in the prescribed form and deadlines, and the tenant's right to refuse or contest.
- Some tenants have reinforced protections, notably long-time low-income seniors, which strongly limit the possibilities of repossession or eviction.
Step 5 — Sequence your moves (cashflow, resale, refinancing)
Once the audit is done, the levers chosen, and the legal framework mastered, the order of the moves matters. Good sequencing protects your cash and your resale value.
- Prioritize the largest gaps and the fastest levers. A high-gap unit whose lease is expiring, or a tenant already thinking of leaving, is handled before the complex cases.
- Spread out the compensations to fit your cashflow. A cash for keys is an investment: space them out so you don't drain your treasury, especially in the first year.
- Think about resale and refinancing. Every rent brought up raises the building's value and your borrowing capacity. Once rents are at market, a refinancing can pull out a good part of the created value in cash — enough to fund the next unit.
Worked example: a fourplex $450/door below market
You buy a fourplex whose four units are rented about $450 below market. The total gap is $1,800 per month, or $21,600 per year in recoverable income.
At a 5% cap rate, that gap represents: $21,600 ÷ 0.05 = $432,000 in locked-in value in the building.
By combining the levers — two negotiated increases, one compensated voluntary departure, one unit left to natural turnover — you gradually bring all four rents up to market. Even by investing, say, $30,000 in compensation, you're left with a net gain of about $400,000 and $21,600 in additional annual income, permanently.
This calculation is conservative: it counts only the value created by bringing rents to market, without renovations or the leverage of refinancing. It shows why a building "bought with rents that are too low" isn't a problem but an opportunity: the fortune is already in the walls; the task is to unlock it cleanly.
Where do you start, concretely?
The very first smart move, and it's free, is the audit. Before approaching anyone, you need to know the real gap for each unit, the total locked-in value, and the profitable lever unit by unit. That quantification is what turns a hunch ("my rents are low") into a precise, legal action plan.
Buying a building with below-market rents isn't inheriting a headache: it's acquiring an asset whose value is partly just waiting. Audit, quantify, pick the right lever per unit, respect the TAL framework, and sequence. Done with method and respect, this plan turns a building running at half speed into a fully productive asset.
This article is provided for informational purposes and does not constitute legal advice. The TAL's rules evolve — always confirm the applicable terms or consult a professional.