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highrise apartment building - Investing in Multifamily Properties

Investing in Multi-Family Properties

Before investing in multi-family properties, evaluate the risks to choose ones that minimize losses and support your investment goals.

Many people began their rental journey by graduating from their parent’s home into a multi-family property/apartment building. This early rental experience makes investing in multi-family properties an understandable residential/commercial investment.

The definition of a multi-family property is any property with more than one unit such as duplexes, triplexes, fourplexes, sixplexes, eightplexes, apartment and condominium complexes.

Many investors get their feet wet by purchasing a duplex or fourplex, living in one unit, and renting the others. This type of multifamily falls under residential real estate investing and is slightly more complex than what you experienced applying for funding for your principal residence.

Multi-family properties with more than five units fall under the commercial real estate category, are more expensive, and have different qualification criteria than residential. Qualification criteria for commercial loans are more stringent and have higher interest rates. The two main criteria for commercial investments are the number of units, and whether you’ll live in one of the units.

Owner-occupied vs. non-owner occupied multi-family properties

Owner-occupied and non-owner-occupied determine how much of a down payment you need to come up with, the amortization periods and whether mortgage default insurance is required.

Down payments

Owner-occupied investments only required 5-10% depending on the number of units in the property. But if the purchase price is over $500,000, owner-occupied properties must pay 5% of the first $500K plus an additional 10% for any amount over 500K. Non-owner-occupied investment properties require a 20% down payment.

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Mortgage Default Insurance

If you provide less than a 20% down payment, the Government of Canada requires mortgage default insurance to compensate the mortgage lenders. Insurance is calculated as a percentage of your mortgage and is based on the size of your down payment. The more you borrow, the more your mortgage default insurance will cost. The premium is added to the principal amount of the loan and repaid over the same amortization period.


Amortization periods vary considerably with non-owner and own-occupied multi-family investments. If you have less than a 20% down payment – the maximum amortization is 25 years. If you can put down more than 20%, your amortization period jumps to 30-35 years, but this adds .25% to your premium.

Qualifying for multi-family properties

The owner-occupied qualification is based on:

  • Agreement of purchase and sale
  • Proof of down payment
  • Proof of steady income
  • Verification of existing renters (if possible)
  • Zoning documentation for residential/commercial
  • Credit check and debt coverage ratio

The non-owner-occupied qualification is based on:

  • Building profitability  – cap rate (a percentage that gives an estimate of income property’s value; net income divided by sale price) of between 4-10%
  • Your experience in real-estate management
  • The location of the building
  • The building’s condition
  • Occupation rate of units
  • Availability of cash after financing
  • Debt-to-income ratio – cash flow should exceed expenses by 25%
  • An evaluation of your financial situation

Similar to when you applied for a mortgage on your primary residence, you can choose a bank or mortgage broker to pre-approve your investment financing. An experienced multi-family mortgage broker has the experience and familiarity with special financing conditions for specific lenders, they only pull your credit report once, and can shop around for the best match.

Lastly, why would investors consider multi-family properties over single-family investments?


Multi-family investments are considered a “safer” investment than single-family housing for several reasons;

  • In every economy, people need less expensive places to live
  • They typically have higher cash flow than single-family dwellings,
  • They are more affordable to construct
  • Foreclosure rates are lower than with single-family units
  • It’s easier to manage 14 units under one roof than 14 separate properties
  • Property management fees are justifiable
  • There are multiple ways to invest either actively or passively
  • Tax incentives are better than for single-family units
  • Insurance is simpler
  • The appreciation rate is higher than single-family units
  • If the building is well maintained and in a good location – the risk of 0% vacancy is low
  • It can boost your investment portfolio more quickly


Despite the multitude of benefits for multi-family properties, there are still some downsides;

  • Property management can be outsourced but you may still have to work alongside staff to create systems and efficiencies for management
  • They are considerably more expensive than single-family units
  • The competition for multifamily’ s can be intense

That said, all real estate investments carry risks and benefits. Before considering making the leap to multi-family investments, study the market and evaluate the risks to choose the right multi-family investment that minimizes losses and supports your investment goals.  

Do you own multifamily’s? I’d love to hear how you got into investing and how they’re working out for you email me [email protected]

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