Multi-unit Property with 5 Units or More
Commercial Multi-Prêts – Elite Team
The financing of multi-unit properties is based on the evaluation of the economic value of a property, more precisely its loan value. However, several other aspects are important including:
- The location of the property
- The type of housing (5 1/2, 4 1/2, 3 1/2…)
- The number of years that tenants occupy the premises
- The average vacancy rate of the building
- The physical aspect of the building and its sustained upkeep
- Your management experiences
- The available parking spaces
- Various ratios such as the aggregate discount rate (ADR), the gross income multiplier (GIM) and the net income multiplier (NIM). The price per door may be considered in certain situations.
The percentage of funding varies by financial institution and could be as high as 85% of lower cost or economic value.
Under conventional financing, amortization will be limited to 25 years (sometimes 30 years under certain exceptions). Under a CMHC-insured loan, amortization may vary from 30 years for most buildings and up to 40 years for new buildings.
The documents required by financial institutions are usually:
- Your personal financial information (personal balance sheet, tax report, a notice of assessment, proof of assets, etc.)
- Financial statements of your business
- The purchase offer and the appendices
- Confirmation by the statement of a bank account of your down payment for the last 3 months
- A market evaluation less than 2 years old for conventional loans and less than 6 months for CMHC insured loans
- A phase 1 environmental assessment of less than 1 year
- Inspection report (sometimes required)
- A structure report (sometimes required for buildings in less good physical condition)
- History of renovations to the property
- The tenant register
- Copy of leases and renewals
- A statement of the income and expenses of the building
- Municipal and school tax statement
- The annual statement of energy expenses assumed by the owner
- Copy of the building’s insurance policy
- A certificate of location less than 10 years old
As for the interest rate, you can choose a term varying between 1 and 10 years. Please note, however, that if your financing is provided by CMHC, you will have to choose a minimum first term of 5 years (3 years on an exceptional basis). The rate for this type of financing is not displayed by most banks. The interest rate will be defined according to the risks incurred by the financial institution according to the information provided. You can, however, consult our section on interest rates on the present website.
The bank will also impose an acceptance fee and possibly an annual review fee that we will negotiate for you.
Your mortgage broker
Your mortgage broker will be your ally in order to obtain:
- The highest percentage of financing to reduce your down payment
- The longest amortization to reduce the impact on your cash-flow
- The lowest possible application fees
- Negotiating the best financing conditions on the market