Owning multimillion dollar real estate properties like the wealthy is more accessible than most investors realize. The key lies in understanding government-backed financing programs and strategic development approaches that dramatically reduce capital requirements. For Canadian investors seeking to build substantial portfolios, the combination of CMHC MLI Select financing, missing middle housing development, and innovative construction methods creates unprecedented opportunities for wealth accumulation.
Understanding Commercial vs Residential Classification
When lenders evaluate investment properties, they categorize buildings with five or more units as commercial rather than residential. This distinction matters significantly for financing purposes because commercial properties unlock access to specialized programs unavailable to typical residential investors.
Multifamily residential properties including apartment buildings, sixplexes, and purpose-built rentals fall under this commercial umbrella when they exceed four units. Understanding navigating commercial lending for 5+ unit buildings and specialized multifamily mortgage financing options is essential. This classification opens doors to higher loan-to-value ratios, extended amortization periods, and government-insured lending products designed to encourage rental housing development across Canada.
The Power of CMHC MLI Select Financing
The Canada Mortgage and Housing Corporation offers its revolutionary MLI Select program specifically designed to incentivize affordable, accessible, and energy-efficient rental housing development. This program fundamentally changes the economics of multifamily investing through several key benefits.
Up to 95% Loan-to-Value Financing
Qualifying projects can access financing covering up to 95% of construction costs, meaning investors may only need 5% down payment to control substantial assets. For a million-dollar building project, this translates to approximately $50,000 in required capital rather than the traditional $250,000 or more required under conventional commercial financing.
Extended Amortization Periods
MLI Select offers Amortization periods extending to 50 years, dramatically improving monthly cash flow compared to standard 25-year terms. This extended timeline significantly reduces mortgage payments while allowing investors to maximize rental income retention.
Below-Market Interest Rates
Properties financed through CMHC-insured programs typically secure interest rates between 3.5% and 4% depending on loan size and project specifics. These rates represent substantial savings compared to conventional commercial lending products.
With MLI Select offering up to 95% financing and 50-year amortization, the numbers look very different from conventional lending — book a free strategy call with LendCity and we’ll show you what you could qualify for.
The Missing Middle Housing Opportunity
A significant gap exists in Canadian housing supply between single-family homes and high-rise apartment buildings. This missing middle housing segment includes sixplexes, townhomes, stacked townhouses, and low-rise apartments that many communities desperately need but few developers actively build.
Why Few Developers Focus on Six to Twelve Units
The smallest residential properties attract numerous first-time investors, while large apartment developments draw institutional capital and experienced development firms. Properties in the six to twelve unit range often get overlooked because they require development expertise but generate less total revenue than larger projects.
This creates exceptional opportunities for investors willing to operate in this underserved market segment. Competition remains limited while demand for these housing types continues growing across Canadian cities.
Provincial Zoning Changes Supporting Density
Several provinces have enacted legislation allowing increased density on existing residential lots. Alberta permits building up to eight units on qualifying lots without extensive rezoning applications. British Columbia mandates that municipalities allow three to six units on previously single-family zoned properties near transit.
These regulatory changes remove traditional barriers that prevented missing middle development and create pathways for investors to maximize property potential without lengthy approval processes.
The Development Strategy That Creates Wealth
Building new properties rather than purchasing existing buildings provides several strategic advantages for investors seeking maximum returns with minimal capital deployment.
Construction Financing to Stabilized Refinance
The wealth-building strategy involves securing construction financing at high loan-to-value ratios, completing the development, stabilizing rents over a short holding period, then refinancing to extract invested capital. When executed correctly, investors can pull out all their original investment while retaining permanent ownership of appreciating assets.
This approach works because newly constructed properties achieve maximum appraised values when fully leased at market rents. The appreciation combined with forced equity creation through development allows refinancing at values exceeding construction costs.
Controlling Property Value Through Rent
This control represents one of the most significant advantages of commercial real estate investing. Strategic property management and value-add improvements translate directly into measurable equity gains.
The construction-to-stabilized-refinance strategy can let you pull out all your original capital while keeping the asset — book a free strategy call with us to map out how this approach could work for your first development project.
Prefab and Modular Construction Advantages
Traditional construction methods face challenges including labour shortages, material cost fluctuations, and weather-related delays. Prefabricated and modular construction techniques offer compelling alternatives that address these issues while potentially reducing costs.
Cost Per Square Foot Comparisons
Some prefab manufacturers have achieved construction costs around $225 per square foot for completed units, significantly below traditional construction costs that often exceed $300 per square foot in many markets. This cost advantage improves project economics and increases potential returns.
Year-Round Construction Capability
Factory-built housing components allow construction to continue regardless of weather conditions. While site work may pause during winter months, manufacturing continues uninterrupted, reducing overall project timelines and carrying costs.
Government Investment in Factory Construction
Federal housing initiatives include substantial funding for prefab housing capacity expansion. As production scales, per-unit costs continue declining, making this construction method increasingly attractive for developers seeking cost certainty and faster completion timelines.
Tax-Free Wealth Extraction Through Refinancing
One of the most powerful aspects of real estate investing involves accessing accumulated equity without triggering immediate tax consequences. Understanding this strategy helps investors accelerate wealth building significantly.
Refinancing is Not Taxable Income
When investors refinance properties to access equity, the proceeds represent borrowed funds rather than income. The Canada Revenue Agency does not tax loan proceeds, meaning investors can access hundreds of thousands of dollars without owing a single dollar in taxes on that amount.
Long-Term Wealth Accumulation Example
Consider a property purchased for $755,000 that appreciates to $2.1 million over a decade. Rather than selling and paying capital gains tax on $1.35 million in gains, the investor can refinance to 80% loan-to-value, accessing approximately $1.68 million in tax-free capital while retaining ownership of the appreciating asset.
This strategy allows investors to pay themselves substantial sums while deferring taxes indefinitely and maintaining exposure to future Appreciation.
Additional Dwelling Units for Beginning Investors
Investors building their initial portfolio often start with house hacking strategies that combine personal residence with rental income generation.
House Plus ADU Strategy
Purchasing a single-family home and adding an additional dwelling unit creates instant rental income potential. Many municipalities now permit secondary suites, garden suites, and laneway homes without extensive approval processes.
When structured correctly, rental income from the ADU can cover substantial portions of the mortgage payment, reducing personal housing costs while building equity in an appreciating asset.
Refinancing ADU Properties for Portfolio Growth
After completing ADU construction and establishing rental history, investors can refinance to extract their renovation investment and repeat the process with additional properties. This BRRRR strategy (Buy, Renovate, Rent, Refinance, Repeat) accelerates portfolio growth using recovered capital.
Bureaucratic Improvements Accelerating Development
Many Canadian municipalities have modernized approval processes, reducing timelines and frustration for developers undertaking housing projects.
Cloud-Based Permit Systems
Digital submission systems allow developers to track applications in real-time and identify bottlenecks. Rather than submitting identical documents to multiple departments, single uploads populate across all reviewing agencies simultaneously.
Development Assistance Coordinators
Many cities now assign dedicated coordinators to development projects, providing single points of contact for navigating approvals. When delays occur, these coordinators can intervene to maintain progress.
These improvements have substantially reduced approval timelines for developers willing to learn updated processes and maintain proactive communication with municipal staff.
Fragmented Ownership Opportunities
Investors lacking sufficient capital or experience for independent development can participate in larger projects through joint venture partnerships and syndication structures.
Partnering With Experienced Developers
Development teams actively seek capital partners who contribute funds while experienced operators manage construction and property management. These arrangements allow passive investors to participate in projects requiring expertise they may not possess.
Permanent Equity Positions
Getting Started With Strategic Real Estate Development
Building substantial real estate wealth requires combining appropriate financing strategies, market knowledge, and execution capability. Learn about mastering calculated leverage and building wealth with a growth mindset to understand how top investors use debt strategically. Working with professionals experienced in investment property financing and development processes significantly improves outcomes.
Whether pursuing missing middle housing development, adding accessory dwelling units to existing properties, or participating in larger syndicated projects, opportunities exist across the capital and experience spectrum. For a real-world example of scaling at this level, learn how to build an $80 million real estate portfolio.
Frequently Asked Questions
What is CMHC MLI Select and how does it benefit investors?
How much money do I need to invest in a multifamily property?
What is missing middle housing and why does it matter for investors?
Can I build multiple units on a single-family lot in Canada?
How do 50-year amortizations affect investment property cash flow?
What is the difference between residential and commercial property financing?
How does refinancing allow tax-free access to property equity?
What are the advantages of prefab construction for multifamily development?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
December 29, 2025
Reading Time
8 min read
Amortization
The period over which a mortgage is scheduled to be fully paid off through regular payments of principal and interest. In Canada, common amortization periods are 25 or 30 years, though the mortgage term (when you renegotiate) is typically 1-5 years.
Appreciation
The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat - a real estate investment strategy where you purchase a property below market value, renovate it to increase value, rent it out, refinance to pull out your initial investment, and repeat the process with the recovered capital.
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
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Closing Costs
Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments.
DSCR
Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.
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.
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.
Underwriting
The process lenders use to evaluate the risk of a mortgage application, including reviewing credit, income, assets, and property value to determine loan approval.
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.
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.
CMHC MLI Select
A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.
Commercial Lending
Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.
House Hacking
Living in one unit of a multi-unit property while renting out the others to offset your mortgage payments and living expenses.
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.
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.
Joint Venture
A partnership between two or more parties to invest in real estate, combining capital, expertise, or credit to complete a deal.
Syndication
Pooling capital from multiple investors to purchase larger properties, typically structured with general partners (operators) and limited partners (investors).
Multifamily
Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
Single Family
A detached home designed for one household, the most common property type for beginner real estate investors.
Value-Add Property
A property with potential to increase value through renovations, better management, rent increases, or adding units.
Refinance
Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Property Management
The operation, control, and oversight of real estate by a third party. Property managers handle tenant screening, rent collection, maintenance, and day-to-day operations.
Rental Income
Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.
Carrying Costs
The ongoing expenses of holding a property, including mortgage payments, property taxes, insurance, utilities, and maintenance. Understanding carrying costs is essential during renovation periods when the property generates no rental income.
Energy Efficiency
The effectiveness with which a property uses energy for heating, cooling, lighting, and other functions. Energy-efficient upgrades to rental properties reduce operating costs, increase NOI, and can add significant property value while qualifying for government rebates.
Zoning
Municipal regulations that dictate how properties in specific areas can be used, including residential, commercial, industrial, or mixed-use designations. Zoning bylaws affect what investors can do with properties, including rental restrictions, multi-unit conversions, and home-based businesses.
Capital Gains Tax
Tax owed on the profit from selling an investment property, calculated as the difference between the sale price and the adjusted cost base. In Canada, 50% of capital gains are included in taxable income, though recent changes have increased the inclusion rate for amounts over $250,000.
Comparable Properties
Similar properties in the same market area used to establish fair market value or rental rates through comparison of features, location, condition, and recent sale or rental prices. Analyzing comps is essential when determining offer prices and setting competitive rents.
Construction Loan
Short-term financing used to fund building a new property. Funds are released in stages (draws) as construction milestones are completed, and interest is charged only on drawn amounts. Construction loans typically convert to permanent financing upon project completion.
ADU
Accessory Dwelling Unit - a secondary residential unit on a single-family property, such as a basement suite, laneway house, garden suite, or in-law suite. ADUs increase rental income and property value while leveraging existing land and infrastructure.
Secondary Suite
A self-contained rental unit within or attached to a single-family home, such as a basement apartment, laneway house, or garden suite. Secondary suites help investors generate additional rental income from one property and can qualify for rental offset programs that improve mortgage qualification.
Construction Financing
A short-term loan that funds the building or major renovation of a property, disbursed in stages (draws) as construction milestones are completed. Once building is finished, the construction loan is typically replaced with a permanent mortgage through a process called takeout financing. Interest is charged only on the amount drawn.
Hover over terms to see definitions, or visit our glossary for the full list.