Buying your first multifamily building feels like a massive leap. You have been dealing with single-family rentals and duplexes, and now you are looking at a 6-unit, 12-unit, or 20-unit apartment building with a price tag that has an extra zero on it.
Here is what most investors do not realize: financing a multifamily building can actually be easier than financing your fifth single-family rental. Why? Because multifamily lenders care about the property’s income, not yours. And the financing tools available for apartment buildings — especially through CMHC — are some of the most powerful leverage products in Canadian real estate.
This guide walks you through every financing option, every qualification requirement, and every step of the process for buying your first multifamily building.
Why Multifamily Is Different (and Better)
Economies of Scale
Managing 12 units in one building is far easier than managing 12 single-family homes scattered across a city. One roof, one furnace system, one property manager, one insurance policy. Your cost per unit drops significantly.
NOI-Based Qualification
Single-family rental mortgages qualify you based on your personal income and debt ratios. Multifamily mortgages qualify the building based on its Net Operating Income (NOI). If the building generates enough income to cover its debt payments with room to spare, you can get approved — even if your personal income alone would not support the mortgage.
This shift from personal income qualification to property income qualification is the single biggest advantage of moving into multifamily. It removes the ceiling that caps most single-family investors at 5-10 properties.
CMHC Benefits
CMHC mortgage insurance for multifamily buildings (5+ units) is nothing like CMHC for homebuyers. It is a powerful leverage tool that offers terms no conventional lender can match. More on this below.
Reduced Vacancy Risk
If your single-family rental sits empty, you lose 100% of your income and still pay the full mortgage. If one unit in a 12-unit building sits empty, you lose 8% of your income. Multifamily diversifies your income stream across multiple tenants.
Financing Option 1: CMHC MLI Select
CMHC MLI Select is the most powerful financing tool available for Canadian multifamily investors. If your building qualifies, the terms are exceptional.
What CMHC MLI Select Offers
- Up to 95% loan-to-value — as little as 5% down payment on a qualifying building
- Up to 50-year amortization — dramatically reducing monthly payments and improving cash flow
- Competitive interest rates — often lower than conventional commercial mortgages
- Fixed-rate terms of 5 or 10 years
Qualification Requirements
- Property must be 5+ units — this is the minimum for CMHC multifamily insurance
- Debt Service Coverage Ratio (DSCR) of 1.1 or higher — the property’s NOI must exceed annual debt payments by at least 10%
- Net worth requirement: Your net worth must be at least 25% of the loan amount
- 50-point scoring system: CMHC uses a scoring matrix based on energy efficiency, accessibility, and affordability criteria. Higher scores unlock better LTV and amortization terms
- Property must be in acceptable condition — CMHC will inspect and may require capital improvements
How the 50-Point Scoring Works
CMHC awards points in categories like:
- Energy efficiency improvements (better insulation, high-efficiency boilers, LED lighting)
- Accessibility features (wheelchair access, accessible units)
- Affordability commitments (renting a percentage of units below market rate)
The more points your building earns, the higher the LTV and the longer the amortization CMHC will offer. A building scoring 40+ points could access 95% LTV with 50-year amortization. A building scoring lower might only qualify for 85% LTV with 40-year amortization.
Run your numbers through the CMHC MLI max loan calculator before making an offer to see exactly what financing is possible.
Why CMHC MLI Select Changes the Math
Consider a $2,000,000 apartment building:
Conventional financing (75% LTV, 25-year amortization):
- Down payment: $500,000
- Mortgage: $1,500,000
- Monthly payment (estimated): ~$8,400
CMHC MLI Select (95% LTV, 50-year amortization):
- Down payment: $100,000
- Mortgage: $1,900,000
- Monthly payment (estimated): ~$7,200
With CMHC, you put $400,000 less down and your monthly payment is actually lower because of the 50-year amortization. That $400,000 in savings could fund two more building purchases. This is why multi-family mortgage financing through CMHC is the most powerful scaling tool in Canadian real estate.
Use our free CMHC MLI max loan calculator to see exactly how much you can finance on your next multifamily deal with CMHC insurance.
Financing Option 2: Conventional Commercial Mortgages
Not every building qualifies for CMHC, and not every investor wants the CMHC process. Conventional commercial mortgages are the alternative.
Typical Terms
- 65-75% LTV — meaning 25-35% down payment
- 25-year amortization — standard for commercial
- 5-year terms — renewable at maturity
- Interest rates vary by lender, property type, and market conditions
- DSCR requirement: Typically 1.2-1.3
When Conventional Makes Sense
- Buildings with fewer than 5 units (CMHC requires 5+)
- Properties that do not meet CMHC’s condition or scoring requirements
- Investors who want faster closings (CMHC can take 60-90 days)
- Value-add properties where you plan significant renovations before stabilizing
Lender Types
- Schedule I banks: Major Canadian banks with commercial lending divisions
- Credit unions: Often more flexible on smaller multifamily deals
- Life insurance companies: Competitive rates on larger, stabilized properties
- Private commercial lenders: Higher rates but more flexible on property condition and borrower profile
Financing Option 3: Credit Unions
Credit unions are often overlooked for multifamily financing, but they can be excellent for first-time multifamily buyers.
Advantages
- More relationship-based lending — they want to know you, not just your numbers
- Flexible on smaller buildings (5-12 units) that big banks might not prioritize
- Competitive rates, often matching or beating Schedule I banks
- Willing to work with newer multifamily investors
Limitations
- Smaller lending capacity — they may not finance buildings over $5-10 million
- Geographic restrictions — most credit unions focus on specific provinces or regions
- Slower processing times than major banks
Financing Option 4: Private Commercial Financing
Private lenders in the commercial space serve a different purpose than residential private lenders. They are useful for:
- Bridge loans for temporary property financing gaps to acquire a building quickly and refinance with CMHC or conventional later
- Value-add deals where the building does not currently meet conventional lending standards
- Quick closings when the seller needs to move fast
Private commercial rates are typically 7-12% with 1-3% fees and 1-2 year terms. These are short-term tools, not long-term holds. Your exit strategy (refinancing into permanent financing) must be clear before you take private commercial money.
How to Analyze a Multifamily Deal for Lender Approval
Lenders do not look at multifamily buildings the way they look at single-family homes. They care about income, expenses, and the resulting ratios.
Key Metrics Lenders Evaluate
Net Operating Income (NOI): NOI = Gross Rental Income - Vacancy Allowance - Operating Expenses
Operating expenses include property management, insurance, property taxes, maintenance, utilities (if paid by landlord), and reserves. They do not include mortgage payments.
Capitalization Rate (Cap Rate): Cap Rate = NOI / Purchase Price
Cap rates indicate the return on an unlevered investment. In major Canadian markets, multifamily cap rates range from 3.5-6% depending on location and building quality.
Debt Service Coverage Ratio (DSCR): DSCR = NOI / Annual Debt Service (mortgage payments)
CMHC requires a minimum DSCR of 1.1. Conventional lenders typically want 1.2-1.3. A DSCR of 1.3 means the building generates 30% more income than its debt payments.
What Lenders Want to See in Your Application
- Trailing 12-month financials: Income and expense statements for the past year
- Current rent roll: Every unit, its size, current rent, lease expiry, and tenant name
- Property condition report: Inspection findings, capital improvement needs
- Environmental report (Phase I): Required for commercial transactions
- Appraisal: The lender orders this, but the borrower pays
- Your personal net worth statement: Assets, liabilities, and liquid reserves
- Your real estate experience: Previous properties owned and managed
The more organized and complete your application package, the faster the approval. Lenders see disorganized applications as a red flag about how you will manage the building.
Building Your Multifamily Team
You cannot buy a multifamily building alone. You need a team of specialists who have done this before.
Mortgage Broker
Your mortgage broker needs to specialize in commercial and multifamily financing — not just residential. They should have direct relationships with CMHC-approved lenders, credit unions, and commercial lenders. A broker who only does residential mortgage financing will not have the tools or relationships to get you the best multifamily deal.
Ask your broker:
- How many multifamily deals have you closed in the past year?
- Which CMHC-approved lenders do you work with?
- What is the smallest multifamily deal you have financed?
Real Estate Lawyer
Commercial real estate transactions are more complex than residential. Your lawyer needs experience with:
- Commercial purchase agreements
- Due diligence review (environmental, zoning, building code compliance)
- Corporate structures if you are buying through an entity
- Mortgage registration for commercial properties
Property Manager
If you are buying a 6+ unit building, professional property management is not optional — it is expected by lenders. CMHC and most commercial lenders require a property management plan. Having a property manager in place before closing shows lenders you are serious.
Even if you plan to self-manage initially, have a property management company on standby. Lenders want to know the building will be professionally run.
Building Inspector
A commercial building inspection is more thorough than a residential one. You need someone who can evaluate:
- Roof condition and remaining life
- Mechanical systems (boilers, HVAC, hot water)
- Electrical systems and panel capacity
- Plumbing (including main sewer line camera inspection)
- Foundation and structural elements
- Fire safety and code compliance
- Capital expenditure forecast (what needs replacing and when)
This inspection feeds directly into your lender’s evaluation and your own budgeting for reserves.
Accountant
A real estate-focused accountant helps you:
- Structure the purchase for tax efficiency
- Set up the right corporate entity if needed
- Plan for capital cost allowance (CCA) deductions
- Manage HST implications on commercial properties
- File properly for both income tax and GST/HST
The Step-by-Step Purchase Process
Step 1: Define Your Criteria
Before you look at a single listing, decide:
- Target market (city and neighbourhood)
- Unit count range (6-12 units for your first building is a good starting point)
- Maximum purchase price based on your available capital and financing
- Minimum cap rate and DSCR
- Acceptable property condition (turnkey, light value-add, or heavy renovation)
Step 2: Get Pre-Qualified
Meet with a mortgage broker who specializes in Canadian multifamily financing and get pre-qualified. You need to know:
- Your maximum purchase price
- Which financing program you will likely use (CMHC vs. conventional)
- What down payment is required
- What documentation you need to have ready
Step 3: Find the Building
Work with a commercial real estate agent who specializes in multifamily. Residential agents do not have access to the same listings or the same market knowledge.
Review the listing package (every serious multifamily listing includes one) which should contain financials, rent roll, photos, and building details.
Step 4: Analyze the Numbers
Run the NOI, cap rate, and DSCR calculations. Compare rents to market rates — is there upside? Review expenses for anything abnormally low (which suggests deferred maintenance) or abnormally high (which suggests mismanagement).
Step 5: Make an Offer
Your offer should include conditions for:
- Financing approval
- Building inspection
- Environmental assessment (Phase I)
- Review of all leases and tenant files
- Review of utility costs and property tax assessments
Step 6: Due Diligence
This is where you verify everything the seller told you. Inspect the building. Review every lease. Confirm rental income with bank statements or etransfer records. Get the environmental report. Review property tax assessments and utility bills.
Step 7: Financing Approval
Submit your complete application package to your broker. For CMHC deals, expect 60-90 days for approval. For conventional commercial, expect 30-45 days. The lender will order an appraisal and review your application.
Step 8: Close
Commercial closings involve more paperwork than residential. Your lawyer handles the legal transfer, mortgage registration, and fund disbursement. Budget 2-4% of the purchase price for closing costs (legal fees, land transfer tax, appraisal, inspection, environmental report).
Common Mistakes First-Time Multifamily Buyers Make
Underestimating operating expenses. The seller’s financials might exclude property management fees (if self-managed), understate maintenance, or defer capital repairs. Always use standardized expense ratios — 35-45% of gross income for operating expenses is typical.
Ignoring capital expenditures. A building that needs a new roof in two years is not the same as one with a new roof. Budget for capital improvements and factor them into your purchase price.
Skipping the environmental report. Phase I Environmental Site Assessments cost $3,000-$5,000 but can save you from buying a contaminated property. Most commercial lenders require one anyway.
Not having enough reserves. Lenders want to see liquid reserves equal to 6-12 months of mortgage payments after closing. If your entire savings goes into the down payment, you will not qualify.
Trying to do it alone. Your first multifamily deal requires a team. Skipping the property manager, using a residential lawyer, or working with a broker who does not do commercial deals will cost you far more than their fees.
If you have been building your portfolio with single-family rentals and are ready to make the jump to multifamily, the financing is more accessible than you think. The key is preparation — having the right team, the right numbers, and the right financing strategy mapped out before you make your first offer.
Frequently Asked Questions
How much do I need for a down payment on a multifamily building?
Do I need multifamily experience to get approved?
Can I buy a multifamily building in a corporation?
How long does it take to close on a multifamily building?
What is a good cap rate for a multifamily building in Canada?
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
February 15, 2026
Reading Time
11 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.
Fixed Rate Mortgage
A mortgage where the interest rate stays the same for the entire term, providing predictable monthly payments regardless of market changes.
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.
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.
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.
Coverage Ratio
A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.
Cap Rate
Capitalization Rate - the ratio of a property's net operating income (NOI) to its current market value or purchase price. A 6% cap rate means the property generates $60,000 NOI annually on a $1,000,000 value. Used to compare investment properties regardless of financing.
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 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.
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.
Bridge Financing
Short-term financing (90 days to 1 year) that covers the gap between purchasing a new property and selling or refinancing another. Investors use bridge loans to act quickly on deals or fund renovations before long-term financing is in place.
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.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Appreciation
The increase in a property's value over time, which builds equity and wealth for the owner through market growth or forced improvements.
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment.
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.
Turnkey Property
An investment property that's fully renovated and often already tenanted, ready to generate income immediately after purchase.
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.
Closing Costs
Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments.
Land Transfer Tax
A provincial tax paid when purchasing property, calculated as a percentage of the purchase price. Some cities like Toronto add additional municipal tax.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Appraisal
A professional assessment of a property's market value, required by lenders to ensure the property is worth the loan amount.
Vacancy Rate
The percentage of rental units that are unoccupied over a given period. A critical factor in cash flow analysis, typically estimated at 4-8% for conservative projections.
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.
Due Diligence
The comprehensive investigation and analysis of a property before purchase, including financial review, physical inspection, title search, and market analysis.
Rent Roll
A document listing all rental units in a property, including tenant names, lease terms, and rent amounts. Essential for verifying income during due diligence.
Mortgage Broker
A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.
Market Rent
The rental rate that a property could reasonably command in the current market based on comparable properties, location, and condition. Understanding market rent is essential to maximize income while maintaining competitive positioning and minimizing vacancy.
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.
HVAC
Heating, Ventilation, and Air Conditioning systems that control temperature and air quality in buildings. HVAC is often one of the largest energy expenses in rental properties, and upgrading to high-efficiency systems can significantly reduce operating costs and increase NOI.
Deferred Maintenance
Necessary repairs and maintenance that have been postponed or neglected, creating a backlog of work that will eventually require attention. Properties with significant deferred maintenance can be value-add opportunities for investors willing to address accumulated issues.
Capital Expenditures
Major one-time expenses for property improvements that extend the useful life of the asset, such as roof replacement, foundation repairs, or new HVAC systems. CapEx differs from regular maintenance and is typically budgeted separately in investment property analysis.
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.
Operating Expenses
The ongoing costs of running a rental property, including property taxes, insurance, maintenance, property management fees, utilities, and repairs. Subtracting operating expenses from gross rental income yields the net operating income.
Property Inspection
A professional examination of a property's physical condition, including structural elements, mechanical systems, roofing, and other components, typically conducted before purchase. Thorough inspections help investors identify problems, estimate repair costs, and negotiate purchase prices.
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.
Property Tax
Annual tax levied by municipalities on real estate based on the assessed value of the property. Property taxes fund local services and are a significant operating expense that investors must account for in cash flow projections.
Capital Cost Allowance
The Canadian tax deduction that allows property owners to write off the depreciation of a building over time, reducing taxable rental income. CCA cannot be used to create a rental loss and must be recaptured upon sale of the property.
Takeout Financing
Permanent long-term mortgage financing that replaces a short-term construction loan after a development project is completed and stabilized. Securing a takeout commitment before construction begins reduces project risk.
Recourse Loan
A loan where the borrower is personally liable for repayment beyond the collateral value. If the property sells for less than owed at foreclosure, the lender can pursue the borrower's other assets. Most Canadian commercial mortgages under $5 million are full recourse.
Net Worth Statement
A financial document listing all assets and liabilities to calculate total net worth. Commercial and portfolio lenders often require this as part of mortgage applications, using total equity across all properties as a qualification factor.
Real Estate Agent
A licensed professional who represents buyers or sellers in real estate transactions, providing market expertise, negotiation skills, and access to the MLS. Working with an investor-friendly agent who understands rental property analysis and financing strategies can significantly impact deal quality.
Environmental Assessment
A professional evaluation of a property's environmental condition, typically required by commercial lenders. Phase I reviews historical records for contamination risk. Phase II involves soil and water testing. Essential for commercial and industrial property purchases.
Cash Reserve
Liquid funds set aside by a property investor to cover unexpected expenses such as repairs, vacancy periods, or mortgage payments during tenant turnover. Lenders may require proof of cash reserves as part of mortgage qualification.
Capitalization
The total value of a property based on its income-producing potential, calculated by dividing NOI by the cap rate. Also refers to the overall investment structure and the amount of debt versus equity used to acquire a property.
Insulation
Material installed in walls, attics, and floors to resist heat flow, measured by R-value. Upgrading insulation in older properties reduces heating and cooling costs, improves tenant comfort, and can qualify for government energy rebates.
Plumbing
The system of pipes, drains, fixtures, and fittings in a building that distributes water and removes waste. Plumbing issues are among the most costly repairs in rental properties, and older galvanized or polybutylene pipes often need replacement during renovations.
Foundation
The structural base of a building that transfers loads to the ground. Foundation issues such as cracks, settling, or water intrusion are among the most expensive repairs in real estate and can significantly impact property value and financing eligibility.
Roof Replacement
A major capital expenditure involving the complete removal and installation of a new roofing system. Roof age and condition are critical factors in property inspections, insurance eligibility, and financing approvals, with typical costs ranging from $5,000 to $30,000+ depending on property size.
Hover over terms to see definitions, or visit our glossary for the full list.