Financing Multi-unit Residential Rental Properties

Application process requires lender's analysis of the real estate performance. Current rent roll and operating (income and expense) statement for the property, and usually 2 year’s history of operation are required. If you are purchasing (as opposed to refinancing) the property, you should be verifying these in any case for your own benefit. Financial information regarding the individual(s) or company applying for financing will also be required. And be prepared to discuss your ability to personally manage the real estate, or your plans to engage professional management services.

Due diligence, in addition to the lender’s analysis, may include third party reports such as property appraisal, environmental risk assessment (ESA) reporting, and building condition assessment (BCA). In some cases a lender also requires that a lawyer acting solely on behalf of the lender be engaged. In others, the borrower’s lawyer may be allowed to act for both parties. In most cases all third party reports and legal fees are at the expense of the borrower.

Costs, rates, and terms are obviously of concern to the applicant. Establish early in the negotiation what lender and third party fees will apply and at what stage of the process they become payable. Ask about the formula for establishing the interest rate and when it may be locked in. Terms such as portability and annual penalty-free prepayment privileges applicable to residential mortgages seldom apply to MUR mortgages. Be sure to understand the privileges your mortgage will include.

CMHC Insurance coverage makes it possible to borrow up to 85% of property value, vs maximum 75% on a conventional (uninsured) loan. Even if you borrow 75% or less, you may wish to insure the loan because this could qualify you for a lower interest rate. Insurance premiums are graduated relative to the loan to value ratio, and can be added to the mortgage amount rather than paid “up front”. Ask your lender whether it is to your advantage to insure the mortgage.

Very important - choose a lending representative that is familiar with this type of financing. A specialist in MUR financing can keep you informed through the process, and greatly simplify and expedite the approval of your application. A lending institution generalist or a residential mortgage representative works only rarely on this type of file and may not provide the expertise and quality service you need and deserve.