Introduction
If you’re looking to grow your real estate portfolio in Toronto and want better financing terms, listen up—5-unit multiplexes are becoming the go-to move for smart investors.
As a CMHC MLI Select realtor team in Toronto, we’re seeing more clients tap into this opportunity to scale faster, borrow more, and build cash flow machines that hold up long-term. Here’s what you need to know.
Why 5-Unit Properties Are Gaining Traction in Toronto
Are you wondering why 5 units in Toronto are trending for Toronto real estate investors?
Unlike many other cities where you’re typically limited to 3 units (usually 2 in the main house and a backyard house), Toronto gives you the green light to go for 5 units on any lot: 4 as of right in the main house plus a laneway or garden suite in the backyard.
Then over the past year, there have been some more game-changing developments:
- Parking requirements for new units? Waived.
- Development charges for both the first 4 units? Waived.
- Development charges for the backyard house? Deferred.
So, it’s pretty safe to say that the feasibility and math are looking a whole lot better lately for Toronto real estate investing.
Why 5 Units Matter for CMHC MLI Select Financing
Once your property has 5 or more residential units, you qualify for commercial financing—and this is where CMHC’s MLI Select program becomes a game changer.
As an active CMHC MLI Select realtor in Toronto, here’s why our investor clients are leaning into it:
Up to 95% loan-to-value (LTV)
Lower interest rates than typical commercial loans
Up to 50-year amortization
Approval is based on the building’s income, not your personal income
So if your property cash flows well, you can keep scaling—even if your T4 doesn’t look exciting.
Why CMHC MLI Select Stands Out in Today’s Market
Here’s why this program hits different right now:
Better cash flows: Lower fixed rates and steady cap rates mean stronger NOI
Higher loan amounts: CMHC lends based on rental performance, not market hype
More stable appraisals: Post-project valuations are based on income, not emotion
With the right setup, your 5-unit project can fund itself and set you up to do this again and again.
Ways to Create 5-Unit Rentals in Toronto
Now if you’re seriously thinking about diving into creating 5+ units to qualify for CMHC MLI Select, there’s actually many ways to get there in Toronto. So what should you do?
Convert Existing House Into 4 Units: Start by turning a large house into multiple units. It’s cheaper initially, but expect smaller units and possibly lower rents.
Build a Fourplex: Buy a house for its land value and build a multiplex. It takes more time and money upfront, but you can design it for maximum rental space and potentially earn higher income.
Now, let’s consider adding the 5th unit:
Laneway or Garden Suite: Build a 3-bedroom house in the backyard for around $400,000. You could rent it for $3,500 monthly, offering good income potential.
Add One More Unit into Main House: If zoning permits, add the 5th unit to the main house, especially in areas closer to downtown or major streets. It’s cheaper to build, but there are development charges. Rental income may be lower than a backyard suite.
By just talking it out, it’s tough to see which option offers the best ROI. We’d really need to crunch the numbers for each specific project to see which ones would actually give the best lift and loan ratios once the project is done.
Capital vs Loan Ratios: What Strategy Fits You Best?
Your Toronto real estate investing choice may vary depending on your available capital and borrowing capacity. Let’s look at some practical examples!
More Limited Capital:
Converting a large existing house into 5 units might be your best bet if your capital is limited but you have substantial borrowing capacity. Despite development charges for the 5th unit, this option has the lowest upfront capital requirements. However, since you won’t be able to maximize rental space, your valuation and value-add potential may be lower, resulting in lower loan ratios post-project completion.
More Capital Available Upfront:
Opting for a hybrid conversion of the main house and building an Accessory Dwelling Unit (ADU) becomes a better choice if you have more capital available upfront. The higher rent yields from the ADU compared to a 5th unit in the main house can significantly boost loan ratios during refinancing with MLI Select.
Maximizing Value-Add Potential & Loan Ratios:
If your goal is to maximize value-add returns and loan ratios upon completion, construction projects remain the preferred route. Choosing between a purpose-built fiveplex or a fourplex plus ADU becomes more of a toss-up. While the ADU incurs higher fixed costs, it saves on development charges. Both options are designed to maximize rental yields, resulting in similar loan ratios.
Work With a CMHC MLI Select Realtor in Toronto
Looking to dive into the world of 5-unit conversions in Toronto to get CMHC MLI Select financing? You’re in luck because our real estate sales brokerage is is your best starting point!
Lately, we’ve been guiding more and more Toronto real estate investing clients through this process of buying and converting, giving us valuable insights into maximizing ROI while mitigating risks and constraints.
But hey, we’re not just there to buy and go away – we go the extra mile by helping you plan your project, connecting you with our trusted network of trades contacts, and are around for ongoing guidance and support as you manage your construction project.
To discuss your private real estate situation with us, just go to this link below to set up a time to chat!
