Canadian Multi Unit Investing

3 Replies

Hi, just wondering if anyone has any information/experience as to how I would go about getting a loan for a 20 unit multi family 50+ in Canada? I listened to episode #470 with Brittany Arnason, she mentions buying a multi unit in Saskatchewan Canada for 1.45% that was backed by the Canadian government. Also, she mentions that getting a commercial loan is easier than getting a traditional mortgage, I just have no idea how to go about getting one! If anyone has any advice that would be greatly appreciated. Thanks in advance! 

Hi Karen,

I would personally disagree that getting a commercial mortgage is easier than getting a conventional residential mortgage. Commercial lenders are significantly more scrutinous than residential lenders and there will be far more covenants, conditions, and security required to underwrite and fund a commercial mortgage along with annual reporting to the bank.

CMHC does provide insurance to certain financial institution for certain real estate asset types making the loans essentially "risk free" to the banks and thereby allowing them to offer the deeply discounted rates and extended amortizations (sometimes up to 40 years). The kicker being that CMHC insurance qualification is a long drawn out process and requires strict adherence to certain conditions.

That said the commercial financing route is likely the only option for a deal of that size and the age restriction may make it a little more difficult but nonetheless with the right covenant and downpayment you should have no issue finding a financier.

Best of luck! Sounds like a great asset.

Hi @Karen T Ryan ! I just watched the episode you mentioned. It was a good one!

I can provide a bit more info. She's saying that it's backed by the government, so she is talking about CMHC-insured mortgages. CMHC (Canadian Mortgage Housing Corporation) is a federally-owned corporation. Their mandate is to make housing more affordable and available for Canadians, so if you are buying multifamily that is inline with that, then they will insure the loan for the lender, and then that comes with more favorable terms (long amortization, higher LTV) and lower interest rates.
You do have to pay a premium and it's quite the process to get it, but usually the better interest rate and terms, are worth it.

One thing on the podcast, when they were talking about the interest rate, they made it sound like she got that fixed rate for 35 years. I'm sure it is only fixed for 5 years, and the amortization is 35. In the US, you can actually get a rate fixed for 10, 20 , 30 years, but that's not a thing in Canada. Some people will take a 10-year fixed, but that's usually the max, as with longer terms, comes higher interest rate. Just something that wasn't clear when they were talking about it.

A commercial loan is not necessarily easier for everyone. For people who have lots of residential mortgages already, low income, self-employed, and high net worth, it is easier. The lender's look more at the building to qualify, rather than you so in that sense it can be easier. BUT, if you have a good job, with good credit, not many mortgages, it's pretty easy to get a traditional mortgage.

I recommend (1) getting more educated about multifamily (2) work with an experienced commercial mortgage broker. If you need some recommendations around those 2, just let me know!