How to Finance a Multiplex Project in Toronto (Every Option Explained!)

This is for educational purposes only; it does not guarantee future performance or serve as financial or tax advice.

In today’s real estate market, investors are shifting gears. With market appreciation becoming less predictable, the focus is now on finding assets with higher rental yields or diving into renovation projects for quicker, more reliable returns. 

The best part? With interest rates starting to ease, borrowing for these projects is becoming more affordable.

But financing these projects isn’t as straightforward as it seems. Many investors hit a wall trying to navigate the confusing world of construction and renovation loans. That’s why we’re here to break it all down for you.

Step 1: Financing the Purchase

Most banks will finance up to 80% of the purchase price for a residential investment property under 5 units.

Rental income might help boost your borrowing power, but it’s heavily tied to your income. For instance, to qualify for a $830,000 property, you’ll need an income of about $160K and 20% cash down, plus closing costs like land transfer taxes and legal fees.

If you’re planning to live in the property, insured residential mortgages let you go above 80%, making it easier for young professionals with strong incomes but less savings to get started.

Step 2: Funding Your Renovation

The renovation phase depends on the scale of your project:

Small to Mid-Sized Renovations: Using cash savings or a home equity line of credit (HELOC) against properties you own are the simplest options. You might consider the government’s secondary suite loan, which offers up to $80,000 at a low 2% interest rate over 15 years. Just keep in mind that working with the government often comes with longer processing times.

Larger Renovations or Builds: This is where construction loans come into play since cash or your HELOC probably won’t cover it. Banks often require about one-third of the total loan amount upfront. They release the rest in stages as milestones are met in the construction process.

Exploring Construction Financing Options

When it comes to financing the construction phase of your multiplex project, there are several options available, each with its own pros and cons. Here’s how they break down:

Conventional Residential Construction Financing For Under 7* Units

This is the standard option most investors are familiar with. Banks provide construction loans tied to your personal income and offer up to 80% of the property’s completed value (LTV). These loans are offered at rates higher than HELOCs, but typically interest-only and are released in stages (draws) as you reach key milestones.

  • Income requirements: To qualify for a $2M loan at 8%, you’ll typically need an annual income of at least $350,000.
  • Same lender requirement: Banks generally require you to use the same lender for both the purchase mortgage and the construction loan because they won’t take a second position on construction financing.
  • Limited lending options for 5-6 units*: Most residential loans are limited to properties with fewer than 5 units. Securing residential construction financing for projects with 5-6 units can be challenging, but RBC is one of the few banks that offers support for these types of residential projects.

 

Insured Residential Construction Financing For Under 5 Units

A new program (launched in January 2025) allows insured construction loans for properties under 5 units, similar to conventional residential construction loans, where financing is tied to your personal income. However, this program offers up to 90% LTV of the completed value, making it more accessible to high-income borrowers with limited savings. Approval times may be longer as the program is still new, but it’s a game-changer for eligible projects.

 

Insured Commercial Construction Financing for 5+ Units (CMHC MLI)

For larger projects involving 5 or more units, you can access CMHC’s MLI Standard or MLI Select programs. These offer high LTV (85%+), long amortization periods (40+ years), and are based on rental income rather than personal income. However, these programs cannot be used for converting single-family homes into multiplexes, which limits their applicability for certain projects.

 

Private Construction Financing

When traditional or insured financing options aren’t viable, private construction financing is an alternative. While this option comes with the highest interest rates and significant monthly payments, it provides flexibility for investors who may not qualify for conventional loans. Use this as a last resort, as the costs can quickly eat into your profit margins if the project doesn’t go as planned.

Step 3: Refinancing After Completion

Once your project is done, refinancing allows you to pull out some of your initial capital at better rates:

For Properties with 6 Units or Less: Residential mortgages offer up to 80% LTV, but cash-out refinances depend on market comps. With fewer multiplexes in the market, appraisers’ opinions can vary widely.

For Properties with 5+ Units: Commercial refinancing through programs like CMHC MLI Select is based on rental income and cap rates. These programs typically offer 85%+ LTV with 40+ year amortizations, providing a predictable way to calculate your cash-out potential from the start.

Why Toronto is Worth It When It Comes To Projects

Construction costs are pretty much the same everywhere, but Toronto’s higher property values give you a much better payoff.

When you renovate or build here, your property ends up being worth more because it’s in a high-demand market. That means the upgrades you make can add a lot more value compared to other areas. 

Plus, when it’s time to refinance, you can pull out more equity because the property is worth more. Simply put, Toronto’s higher property values mean better returns and bigger cash-out opportunities, making it a smart place to invest.

Final Thoughts: Small vs. Big Projects

Smaller projects are faster, simpler, and easier to finance, making them perfect for beginners or those with limited time and capital. They offer a lower risk and can be a great way to get started in real estate investing.

On the other hand, larger projects come with the potential for bigger returns but also carry much more risk. These projects require significant capital, experience, and the ability to manage complex financing and timelines.

While the rewards can be great, the risks involved mean that they’re not for the faint of heart.

How We Can Help

Not sure where to start? At Elevate Realty, we help investors like you navigate Toronto’s multiplex market. From finding the right property to connecting you with reliable contractors and lenders, we’re here every step of the way.

If you’re ready to dive into the world of Toronto multiplexes, let’s chat!

Here’s what it’s like to start as a client with us:

  • Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
  • Market Search & Purchase: We’ll search the market to find the perfect property for you.
  • Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
  • Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.

Ready to get started? Click on the link below, and let’s start working together!

What Toronto Real Estate Investment Is Right For You?

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