Investing in multifamily properties in Canada can be a great way to secure long-term income and build wealth. But what does this type of investment look like in practice? Here’s a closer look at what you need to know about investing in multifamily properties in Canada.
1. Types of multifamily properties
In Canada, multifamily properties can take many forms. Some common types include:
- Apartment buildings: These are typically large buildings with several floors and multiple units. They may be rented out to a mix of tenants, or they may be designated as affordable housing or senior living facilities.
- Duplexes, Triplexes, Fourplexes: These are smaller buildings with two to four units. They may be rented out to separate tenants, or they may be owner-occupied with the additional units rented out to supplement expenses.
- Townhouses: These are multi-unit buildings that are attached to one another, typically in a row or a block. They may be rented out to separate tenants, or they may be owner-occupied with rental units on the side.
2. Financing options 
When it comes to financing multifamily properties, there are a few options available. Some investors choose to pay cash for the property, while others opt for a mortgage. Here are a few common ways to finance a multifamily property purchase:
- Conventional mortgage – Residential: This is a standard mortgage that is typically available for properties with four or less units. The lender will typically require a down payment of at least 20% for an investment property and will consider factors such as the borrower’s credit score, personal income, personal debts, and evaluate their financial ability to take on another loan. Generally a percentage of the rental income from the property will be considered and attributed toward your income to help qualify for the loan.
- Conventional mortgage – Commercial: This is a standard mortgage that is typically available for properties with five or more units. The lender will typically require a down payment of at least 25% and will put much more weight on the financials of the property versus your own personal financial situation. Lenders typically want to see the ratio of income to expenses at a value of 1.2 or higher in order to ensure the revenue from the building can afford the mortgage loan they will be providing.
- CMHC insured mortgage – Commercial: This is a government-insured mortgage that is available for properties with five or more units. The lender will typically require a down payment of at least 15% and will consider the factors noted above for conventional commercial mortgages. With a CMHC insured mortgage the terms are generally more preferable as they offer a longer amortization of up to 40 years and lower than average interest rate.
3. Potential income and returns
The potential income and returns from a multifamily property will depend on a number of factors, including the location, the condition of the property, and the rental market. However, some estimates suggest that investors can expect an annual return on investment (ROI) of 5-10% for multifamily properties in Canada.
4. Risks and challenges
Like any investment, investing in multifamily properties comes with its own set of risks and challenges. Here are a few things to keep in mind:
- Market Fluctuations: The Canadian real estate market can be volatile, and property values can fluctuate. It’s important to do your research and be prepared for market fluctuations, changes in rental rates, and expenses.
- Maintenance and Repairs: Multifamily properties require regular maintenance and repairs, which can be costly. It’s important to budget for these expenses and have a plan in place for handling emergencies and unforeseen expenses that undoubtedly arise.
- Tenant Management and Turnover: Ensuring that you have processes in place for rent collection, tenant questions and concerns, and tenant turnover is crucial to a successful multifamily investment. Whether a property management company is managing the property or you’re self-managing, it’s a good idea to get familiar with the Landlord and Tenant guidelines in your province as this dictates how to deal with any issues and situations that may arise.
Conclusion
Investing in multifamily properties in Canada can be a great way to secure long-term income and build wealth. However, it’s important to do your research and to be prepared for the risks and challenges that come with this type of investment. With the right strategy and support, you can make your multifamily property investment a success. It’s also important to seek the advice of professionals, such as a real estate lawyer, an investment focused realtor, and an investment focused mortgage broker, to help advise on your unique situation and the type of investment property you’re considering.