Force Appreciation in Multifamily Properties | BRRRR Guide

Most people get into apartment building investing for the cash flow. And sure, cash flow is nice. But here’s the thing – you pay taxes on that cash flow.

There’s a better strategy that lets you build serious wealth: forcing Appreciation. This approach lets you create equity you control, pull out your original investment, and own a building with basically none of your own money left in it.

Let’s break down how this works.

Why Multifamily Is Different

When you own a single family rental, your property value depends on what similar houses around you sell for. You can’t really control that.

But apartment buildings? Totally different game.

The value of a multifamily property is based on how much income it generates. That means you can directly control what your building is worth by raising income and lowering expenses.

This is powerful because you can actually predict what your property will be worth after you make improvements. No guessing. No hoping the neighborhood gets better. You’re in control.

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The Basic Strategy

Here’s how forcing appreciation works in practice:

You buy an apartment building for $1,500,000. Maybe the rents are below market because the previous owner didn’t care or didn’t know better.

You put $200,000 into renovations – updating units, improving common areas, making the place somewhere people actually want to live.

Then you raise the rents to market rates as leases come up for renewal or when new tenants move in.

Because the building now generates more income, it’s worth more. In this example, your property is now valued at $2,100,000.

Pulling Your Money Back Out

Now comes the really cool part.

You refinance the property at 75% loan to value. Your new loan amount is $1,570,000.

Think about that for a second. You started with $1,500,000 (your purchase price) plus $200,000 (renovations) – that’s $1,700,000 total. Your new loan gives you $1,570,000.

You’ve pulled almost all your money back out. And you now own a building worth $2,100,000 with only $130,000 of your own capital still in the deal. That’s instant equity of over $500,000.

Your returns on invested capital can be extremely high, because you have almost no money left in the property.

The Two-Loan Approach

This strategy typically requires two different mortgages at two different times.

First is your purchase loan. You can use a credit union at 75% loan to value, but a better option is usually a bridge loan.

Bridge loans come with interest-only payments. This keeps your costs down while you’re doing renovations and getting rents stabilized. You’re not paying down principal when you need that cash for improvements.

Once the building is stabilized with rents at market rates, you get your second mortgage – the takeout financing. This is your long-term loan, usually a five-year term. This can be conventional financing or CMHC financing (which can go above 75% loan to value).

Important note: remember you’ll have closing costs and fees twice. Factor that into your numbers from the start.

Where This Strategy Works Best

Not all markets are created equal for this approach.

You want landlord-friendly markets where you can actually raise rents without tons of restrictions. Alberta is a prime example – lots of investors are successfully doing this there right now.

Markets with heavy rent control make this harder. You might not be able to raise rents enough to force the appreciation you need.

This strategy also works really well in the US, where many markets are very landlord-friendly.

Why This Beats Just Collecting Cash Flow

Remember what we said at the start – cash flow gets taxed.

When you force appreciation and refinance, you’re pulling out cash that generally isn’t treated as taxable income (consult your accountant). You’re not selling the property (which would trigger capital gains). You’re taking out a loan against the equity you created.

Plus, you can now take that money and do it again with another property. And again. And again.

This is how you scale a real estate portfolio quickly without constantly needing to save up for down payments.

This content is for informational purposes only and does not constitute financial, investment, or legal advice. Past performance does not guarantee future results. Always consult qualified professionals before making investment decisions.

Is This Strategy Right For You?

Forcing appreciation in multifamily properties isn’t for everyone. You need to:

• Have enough capital for the down payment and renovations
• Be comfortable managing a larger property or hiring property management
• Be willing to put in the work to stabilize rents and improve the property
• Choose the right market where rent increases are possible
• Understand the financing process and timeline

But if you can check those boxes, this strategy is genuinely game-changing. It lets you build wealth faster than almost any other real estate approach.

The key is being strategic about which properties you buy, making smart renovations that justify rent increases, and working with lenders who understand this type of investing.

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Frequently Asked Questions

Written by

LendCity

Published

December 22, 2025

Tags

Brrrr Multifamily Value Add Cash Flow Mortgage Basics

Key Terms in This Article

Appreciation

Appreciation

The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.

CMHC Insurance

CMHC Insurance

Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.

Cash Flow

Cash Flow

The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.

Closing Costs

Closing Costs

Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments.

Down Payment

Down Payment

The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.

Equity

Equity

The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, appreciation, and property improvements.

LTV

LTV

Loan-to-Value ratio - the mortgage amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower). An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV generally means better rates and terms.

Multifamily

Multifamily

Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.

Market Value

Market Value

The estimated price a property would sell for on the open market under normal conditions. Determined by comparable sales, location, condition, and market demand.

NOI

NOI

Net Operating Income - the total income a property generates minus all operating expenses, but before mortgage payments and income taxes. Calculated as gross rental income minus vacancies, property taxes, insurance, maintenance, and property management fees.

Hover over terms to see definitions, or visit our glossary for the full list.

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