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Basic Financing Question - Apartment Building

Nir

Nir

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REIN Member
Joined
Dec 5, 2007
Messages
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Hi,

Is it true some banks offer for apartment buildings (say 10-25 units) mortgage interest that is similar to what they offer for residential properties (i.e. single family)?

For the same apartment building (say 10-25 units), is the interest lower when putting less down due to CMHC insurance?

I am not sure if in most cases it is reasonable to expect an interest similar to single family (I think it is around prime+0.75 variable as of today) or more like prime+2 (or prime +3) for apartment building(?)

Same question when putting 15% down and when putting 35% down?

Thanks,
Neil
 
With multi-family, the best game in town is CMHC. Currently you can get a 5 year for about 3.5%. Their rules are more stringent-but if your property qualifies- it is a good deal. You cannot go variable with these boys. Peoples Trust does a good job in the West. First National does well in Central Canada. Those are simply my experiences
 
you can get variable rate mortgage around prime + 2 or 3 .. but this is rare .. try a credit union (local to the property)

fixed rate for 5 years is about 5.8 to 6.25% these days

best is a CMHC insured mortgage sub 4% for 5 years, low 5% range for 10 years .. and this is INdependent of cash down .. but the fee CMHC charges is a function of the loan-to-value .. with value being CHMC`s view of value as opposed to the appraiser`s, the purchase price or yours !

We just locked in a 5 year mortgage for $3.5% on a 104 suite property near Edmonton .. but to get CMHC insurance the property has to be in above average condition so sometimes older uglier properties won`t qualify until renovated !
 
Thank You Thomas and Navaz,

So I understand from you that interest will be much better/best with a CMHC insured mortgage(!)

What are CMHC basic requirements/criterias to insure an apartment building in addition to the condition and age of the property?

Will they also require employment income like they do for a regular property?? (i.e. single family) Any other requirement?

Regards,
Neil
 
QUOTE (investmart @ Mar 24 2009, 10:10 AM) Thank You Thomas and Navaz,

So I understand from you that interest will be much better/best with a CMHC insured mortgage(!)

What are CMHC basic requirements/criterias to insure an apartment building in addition to the condition and age of the property?

Will they also require employment income like they do for a regular property?? (i.e. single family) Any other requirement?

Regards,
Neil

I have found that their rules will change for city to city as they deem the risk differently. The experience I have had with them on my deals is that they are looking for a debt service coverage of at least 1.3 times and a Cap Rate of at least 7%. That was in my center anyways. You may have to come up with more and more cash down until you can reach these criteria. Often that would not make sense as you may now be putting down 40% cash or more. It really depends on the current numbers. And make sure you use their current rents to make your analysis, not some PROJECTED number that a realtor has come up with...

The biggest thing they look at is the ability for this apartment to create an income stream. Just like any other business. They want to make sure that this commercial building can service the debt. They will of course look at ALL of your net worth but income stream of the building is first. Having a sophisticated investors binder will go well with the property analysis.
 
I`ve been shopping rates for a 6 plex...and the best I could find was 4.25%...That`s with 15% down and CMHC insured

Is anyone else getting better deals out there? Thomas would you mind telling me where you got the financing through?
 
QUOTE (Brik8 @ Mar 24 2009, 10:49 AM) I`ve been shopping rates for a 6 plex...and the best I could find was 4.25%...That`s with 15% down and CMHC insured

Is anyone else getting better deals out there? Thomas would you mind telling me where you got the financing through?
PeoplesTrust .. but they won`t do 6 -plexes ..

shop around some more .. 4.25% is OK .. but you may be able to get below 4% ..

I assume you use a mortgage broker ?
 
QUOTE (thomasbeyer2000 @ Mar 24 2009, 05:07 PM) PeoplesTrust .. but they won`t do 6 -plexes ..

shop around some more .. 4.25% is OK .. but you may be able to get below 4% ..

I assume you use a mortgage broker ?


Exactly...I`m using a local mortgage broker. They have been very helpful but not sure if I`m getting the best rate.

Thanks for the input.
 
QUOTE (Brik8 @ Mar 24 2009, 06:27 PM) Exactly...I`m using a local mortgage broker. They have been very helpful but not sure if I`m getting the best rate.

Thanks for the input.
get one that specializes in COMMERCIAL .. such as Montrose Mortgage (maybe Peter Kinch, too .. used ot have a guy but he left a whiel ago ..)

6-plex is a very small commercial property and no mortgage broker will put his heart into it .. nor do banks .. not CMHC .. so 4.25% might be the best you can get given the low fees / margins for both lender and broker !
 
QUOTE (Brik8 @ Mar 24 2009, 09:49 AM) I`ve been shopping rates for a 6 plex...and the best I could find was 4.25%...That`s with 15% down and CMHC insured

Is anyone else getting better deals out there? Thomas would you mind telling me where you got the financing through?

6 plexes are really tough to finance - residential lenders don`t want them as they are too big to be marketable to most residential buyers, and commerical lenders don`t really want them as they are too small to be marketable to most commercial buyers.

RBC used to do them residentially (and might still), but typically require that they be in good to very good condition. If you can`t get residential financing, you will likely with financing through an alternative lender, looking at posted plus rates. 4.25% for a 6 plex is actually a great rate.
 
What length of amortization will they do on these? I know CMHC will insure them up to 40 years, but what lenders will lend at this amortization?
 
So, bottom line, please correct if I am wrong: a commercial 20-Plex insured by CMHC will get the SAME financing conditions as residential single family?
In other words, as long as it is insured by CMHC no problem, same interest rate(?)

Lastly, out of curiosity, a question I am assuming commercial mortgage brokers here can answer: what portion approximately of the apartment buildings purchased are CMHC insured? is it like 25%, 50% or probably closer to 75%?

Mark, your input elaborating on the application process and expectation is very helpful. Thanks again Everyone.
 
here is the criteria for cmhc on multi units (over 4 units). my understanding is some lenders will consider up to 6 units within the residential sandbox.

http://www.cmhc-schl.gc.ca/en/hoficlincl/m...-2009_63885.pdf

this will give you all the criteria cmhc requires for this type of loan.



for 1-4 unit properties, see this link for details. this was changed following the abolishment of the 100% LTV over 40 years.

http://www.cmhc-schl.gc.ca/en/hoficlincl/m...me-Property.pdf

my earlier question is... are there lenders that will amortize loans for 30 years?...35 years?...40 years?...
 
QUOTE (RobWatson @ Mar 26 2009, 02:17 PM) What length of amortization will they do on these? I know CMHC will insure them up to 40 years, but what lenders will lend at this amortization?
most do 25 years, .. some insist on 20, some do 30 years (and CMHC charges a premium of 0.25% for an extra 5 years), very few 35 years (and CMHC charges a further premium of 0.25% for another 5 years) .. NO ONE does 40 years in commercial to my knowledge ..
 
QUOTE (RobWatson @ Mar 26 2009, 01:17 PM) What length of amortization will they do on these? I know CMHC will insure them up to 40 years, but what lenders will lend at this amortization?


If you can get a six plex done residentially, you might get up to 35 depending on the remaining economic life of the property. Financed commerically, it will also depend on the remaining economic life of the property but unlikly you`d get much more than 25 and even then, the property would have to be relatively new (or fully updated).

Hope that helps,
 
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