Ontario commercial multi family closing costs and financing?

Question

Hello! Does anyone have experience acquiring a multi family apartment building (7+ doors) in Ontario with a commercial mortgage?  Trying to move up from single family homes but having a hard time figuring out closing costs and financing capacity for commercial multi family properties. Thanks in advance!

Hai Loc · Answer

Try Meridian. 65% LTV 4-5%.. Appraisal $2500 seems accurate, you should get an engineer inspection $1000-1500, I personally would but this is optional if the building appears to be in good shape.. Enviro1 $1500-2000, if this is in a residential area away from gas station or industrial I would trust an old report not over 10-15 years if you want to cheap out.. Can escalate to Enviro2 which will be a couple of more grand if the Inspector feels further research is required. Expect a lender fee as well but likely rolled into the debt.

Hope this helps  good luck

Roy N. · Answer

@Mark Thomas

There are a few options potentially available to you.  You might also look to see if the property could qualify for one of CMHC apartment programs as that may help with financing (and the rate).

I would first approach a local credit union to discuss the deal - it's been our experience they are more attuned to the local market and inclined to look at smaller deals.   The commercial departments of the big banks are usually not interested in deals less than $1M (or even $2M) - around here a 7-unit is not going to pierce that threshold, though it may in Ontario.

You will be looking at a downpayment of 25-35% depending upon the strength of the deal.  Your portion of that downpayment could be as low as 15% if you bring a vendor carry and/or CMHC to the table.

Bart Chinnick · Answer

Hi Mark I'm currently doing same as you with a mixed res/comm property.  Conventional banks are looking at about 65% LTV at 4%.  Appraisal is about $2500.  They based their loan to value on 8.5 cap which is high.  I'm also exploring other financing options through credit unions etc.

Jerry Padilla · Answer

@Shaun Weekes

Can help answer your questions on commercial financing.

Zorya Belanger · Answer

@Andre Manzo Nice looking building by the way! I know it's a totally different market, but if it helps, we bought ours from the builder for $1.35M and it appraised for $1.45M. CMHC however only gave us 85% of the purchase price of 1.35M. Not sure how it works if you are the builder - maybe they will consider the appraised value more.

Zorya Belanger · Answer

@Andre Manzo I just got CMHC financing on a brand new 6 plex in Edmonton. I expect the process to be similar. I worked with a mortgage broker who is knowledgeable with CMHC commercial lending. That's someone who will be able to give you an idea of cap rates. Or they can direct you to an appraiser, which over the phone may be able to give you an idea on the cap rate they will use. For 5-6 unit buildings, CMHC relies a lot on the appraisal to determine the value. The appraiser will use the income approach and direct comparison approach, and will determine value somewhere between. Cost us about $3000 for a commercial appraisal (the lender typically does not pay for the appraisal), which was a 65 page report with a lot of valuable data. You can get one before it's finished being built and then get it updated once you have actual leases in place. New-builds are tricky to finance with CMHC from the beginning as they want it fully leased before funding it. We had ours fully leased before possession but still ended up having to get a temporary commercial loan at 75% LTV because CMHC was so slow. Then we refinanced with CMHC which ended up taking 6 months. A lot of work and unexpected fees, but it will be worth it in the end for 85% LTV, 40 year amortization and <2% interest!

Andre Manzo · Answer

Hi everyone,

I know it’s an old thread but I was starting to look into financing for a sixplex with the help of CMHC insurance. Not really getting any great answers by calling them directly.

I’m looking to build two six plexes in Bolton, Ontario. I am wondering how conservative the appraisal is going to come in. Or rather, what types of cap rates are they going to use. I called CMHC, they weren’t helpful. Said it is up to the appraiser the bank hires. I thought that CMHC would have its say in it.

The project hinges on taking out most of what we put in so that it doesn’t tie up our funds for any next projects. So lets say 2.1M per sixplex for land, soft and hard costs. Hoping it appraises for lets say 2.7m and we get 80% LTV with CMHC and get all the initial cash out. Something along those lines. Fine to keep some in.

Just impossible to gauge how this will be evaluated. Not many six plexes around there. All the ones on the outskirts of Toronto are about 1.8-2m. Crummy looking places.

Has anybody gone through the process or could shed some light on how these things are appraised?

Mark Thomas · Answer

@Roy N. Very helpful, thanks!

Mark Thomas · Answer

@Bart Chinnick thanks for this!  Helps me put guide posts on my calculations. I'll update you all when I find out more details.

Mark Thomas · Answer

@Shaun Weekes it's Ontario Canada

Ontario commercial multi family closing costs and financing?

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