RE Investor Pro Cory Sperle
RE Investor Pro
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Hello. I have created an extensive document on this that you can download if you wish here: https://www.therealestateoutlook.com/6-pillars-due-diligence-checklist
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A large down payment (at least 25% equity) AND reserve fund of 7% of the building purchase price MINIMUM. CMHC especially MLI select is too risky for owners now due to never ending rule changes. CMHC is a bloated, oligarchy that has a complete monopoly on the industry and is a very unreliable partner. I would strongly recommend not using them.
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Usually you will only receive a current rent roll, and 12 to 24 month operating statement. Some sellers are very organized, but some just have hand written notes. Ask for as much as you can!
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Yes, most of my property is in Saskatchewan.
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I had this option to bridge on a recent deal but decided to pass as it was too expensive, and would duplicate legal costs for such a short time frame. This seems like a silly way to do a deal especially if the building is performing well and the intent is CMHC right away (vendors will not wait to close).
20 years ago I did all conventional lending, 25% down, 1.3 DSCR, 25 year amortizations and the numbers worked well, and we are going to that model again. There is simply too much risk for investors to put all of their eggs in the CMHC basket. Why do I say this? Because they keep changing the rules as they go.
– Restricting the use of equity takeout’s.
– Requiring appraisals on purchases and refinances (never did before).
– Offering enticing products like MLI select that they have now increased premiums on, and increased premiums on standard CMHC loans at the same time.
– now refusing to fund unless existing debt is with a CMHC ‘approved’ lender, whatever that means, hence no BRRRR’s using a VTB which was a very popular way to do a deal.
What will CMHC change, remove next?
In short, if your business plan depends on a refinance with CMHC this is an especially risky proposition in today’s marketplace. You are essentially relying on the government to be a partner with you when their best interests do not align with investors. There is a place with CMHC financing in multifamily of course, but it should not be the go-to method and I don’t believe it will be going forward.
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Thanks Mark. I remain skeptical of CMHC and their extremely unreliable lead times has already cost me a deal, and I find most vendors will not accept a 6 months financing condition.
CMHC could be a viable refinance strategy but it’s not nearly as enticing as it once was. If there are bridge lenders out there that are still on the ‘approved’ list do you have a list of them or a link?
VTB was by far the best refinance strategy but the door has slammed on that option too.
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Yes that is correct.
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<div>From Colliers, who is calling on LOW CAP rates for some time: Assets more tied to fundamentals, such as population growth and the job market, continue to perform well. Multi-family</div>
cap rates remain extremely low – below four percent in strong markets – based off expectations of double-digit rent
growth and strong investor demand. Canada’s record-breaking population growth post-pandemic, combined with severely
unaffordable home ownership, has buoyed the investment market for apartments even in a high-rate environment
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True, but expect to get only about 50% loan to value as they will use a 1.3 debt coverage ratio and a rate of 6.5% so a LARGE gap to cover before getting CMHC.