Whether you should sell or rent out your condo in Toronto comes down to three things: the cash flow it produces as a rental, the tax you pay or defer, and how much of a landlord you actually want to be. In a softening rental market, many Toronto owners find that rent no longer covers the carrying costs.
Start with the numbers. Add up the mortgage payment, property tax, condo fees, and insurance, then compare it to what the unit would rent for today. Average one-bedroom condo rents in Toronto slipped to about $1,993 a month early in 2026 as the vacancy rate climbed toward 3 percent. For an owner with a mortgage at current rates, that often means covering a shortfall each month. Condo maintenance fees also rise over time, so a unit that breaks even today may not in a few years.
Tax is the part owners underestimate most. If the condo has been your principal residence, selling it is generally exempt from capital gains under the principal residence exemption. Convert it to a rental and the Canada Revenue Agency treats the switch as a deemed sale at fair market value, exposing later gains to tax. A subsection 45(2) election lets you defer that deemed disposition and keep the principal residence designation for up to four more years, provided you do not claim capital cost allowance. Capital gains stay taxed at the 50 percent inclusion rate after the proposed federal increase was cancelled in 2025. Knowing how capital gains tax works when you sell matters, because the choice is hard to undo cleanly.
Then there is the reality of being a landlord. Ontario's Residential Tenancies Act governs the relationship, and for most units the 2026 rent increase guideline caps annual increases at 2.1 percent. A tenant who stops paying can take months to remove through the Landlord and Tenant Board. You also need to confirm your building permits rentals at all, since some condo corporations limit them.
Selling ends the carrying costs and frees up your equity, but it is not free. Commission, legal fees, and any mortgage discharge penalty come off the top, so it helps to know the full cost of selling a condo before you list.
There is no universal answer. An owner with a low fixed mortgage and a unit that rents above its costs faces a different decision than someone losing money in a falling market. Run the real numbers, factor in the tax, and be honest about whether you want a tenant.
Related reading: Can Your Ontario Condo Corporation Restrict Rentals?, Do You Pay Capital Gains Tax Selling Your Ontario Home?, and Is It Better to Rent or Buy in Toronto?.