Why Invest in Multi-Family Homes?

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Targeting multi-family rental construction aims to offer greater affordability by adding to the supply of much-needed homes. It is also particularly suited to fulfil the growing demand for affordable housing for students and seniors. But there are 2 main reasons why savvy investors should consider investing in the development of multi-family homes: demand and security.

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High Demand

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Canada desperately needs more housing. We can expect a 3.5 million housing gap across the nation by 2030. Ontario has consistently fallen short (and will likely continue to fall short) of its ambitious target of building 150,000 new homes annually to reach 1.5 million by 2031.

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Meanwhile, in Edmonton there is significant demand for multi-family homes, driven by strong population growth, housing affordability, and a growing need for rental properties. This demand is creating a seller's market with increasing prices and tight inventory, as evidenced by rising sales-to-new-listings ratios and year-over-year price increases across residential property types.

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Despite temporary immigration caps, Canada relies heavily on immigration to drive economic growth. Most newcomers must rent a home before they can establish themselves and buy, so rental housing will always be in demand. Another factor that impacts demand is that home ownership has become increasingly unaffordable, driving more Canadians to rent instead. Therefore, we are in desperate need of (and will continue to need) multi-family rental developments in Canada.

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Economic Security

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Unlike other industry-sensitive kinds of real estate, residential real estate is much more secure. During economic downturns, such as the 2008 financial crisis and the pandemic lockdowns of 2020, certain types of real estate dropped, such as hospitality and retail.

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In the midst of a tariff war and economic uncertainty, as jobs were cut and companies struggled to stay afloat, offices and manufacturing spaces also became less stable assets. However, people will always need homes, and multi-family homes prove to be exceptionally resilient in hard times.

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Vacancy rates for purpose-built rentals across Canada have been very low. Even in 2023 and 2024, vacancy rates were 1.5% and 2.2%, respectively, which were below the national 10-year average of 2.7%. Meanwhile, average rental rates increased, hiking up to 23.5% when units turned over. Units that did not turn over still saw rates keeping pace with inflation.  Due to the nature of multi-family properties, these investments can offer better stability and lower risk to landlord investors than a single-family unit. Your eggs won't be in one basket, so to speak.

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How Does the CMHC MLI Select Program Benefit Investors?

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The CMHC MLI Select program offers investors a full-package pre-construction product with incredibly valuable incentives. The attractive benefits of this program include:

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• Up to 95% loan-to-value financing: You will only need around a 5% to 10% down payment to invest in an approved project.

• Up to 50-year amortization: An extra-long amortization period lowers your monthly mortgage payments and carrying costs, making this an affordable investment option.

• Reduced interest rates: Borrow at below-market rates that follow the Canada bond yield rates, which are much lower than regular commercial mortgage rates and even lower than residential mortgage rates.​

 

Other government benefits of CMHC MLI Select projects include no GST or development charges and levies, and your property taxes are also discounted by 15%. Closing costs will be closer to 1% or 2%, making this even more affordable. Additionally, an investor will be purchasing a turnkey property, expertly built by a reputable developer and fully managed by a professional building manager. This means MLI Select-approved properties bring in long-term cash flow without tedious work for investors.

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Plus, owners won't have to start paying the mortgage until the building has leased out at least 97% of its units, achieving rent stabilization. This means the rental income will cover your carrying costs. It's an incredible investment opportunity to buy a cash-flow-positive property!