Multi-apartment blocks, or buildings with apartments accommodating several families, are giving solid returns today and are just the right choice for your property investment portfolio.
Factors Driving Profitability of Multi-apartment Blocks There are several factors that drive this new profitability trend.
The chief of them are easy availability of money, low construction costs, increased demand and low risks involved.
Consider these facts:

• Canadian Mortgage and Housing Corporation (CMHC) is financing all residential properties, independent houses as well as multi-apartment blocks, up to 85% loan-to-value ratio, at an interest rate in the range of mid 3% and low 4%.
  Therefore, cash-on-cash returns on multi-family units are far better.
  
• Many students, workers and senior citizens are moving into new areas like Edmonton because of new factories, businesses or colleges being set up, or new infra-structure projects being taken up in there.
  Thus demand for multi-family apartments is on the rise.
  
• Children of the Baby Boomer generation are now in their late teens to late 20's.
  This is an age when one studies, searches jobs and, in general, moves around.
  People at this age rent houses rather than buying one as they do not have stability in their lives as yet.
  
• The multi apartment rental market trades much below replacement cost; it is about 50% below the construction cost of a new apartment on the same plot of land.
  

How to Finance Investment in Multi Family Units If you are planning to buy a multi-family unit, or an apartment building, easy availability of cash will be crucial to you.
In addition, you must take into account due diligence costs like that of the appraisers, inspectors and upgrades.
A bank underwrites two types of ceilings while financing such properties.
One is minimum cash-to-close ceiling.
In this type of ceiling, you are required to make 20-25% cash down if you don't have CMHC mortgage, or at least 15% if you have CMHC mortgage.
The second is debt-coverage ratio ceiling (DCR).
DCR is nothing but the Net Operating Income (NOI) divided by the purchase price.
Thus, in this case the bank makes a provision for a cushion between the cash returns from a building over and above mortgage payment.
Banks have different criteria for DCR depending on the location.
Normally DCRs required for various types of locations are 1.
2 for a new asset in a big city and 1.
5-2.
0 for an older asset in a secondary or tertiary city like Port Hardy, Melville, Brooks or Alta.
Operating expenses too vary according to the type, age and location of the building.
However, a bank would normally use these criteria to determine an NOI for an underwriting analysis:

• Vacancy: 4-5% (even though the assets may be full)
• Building insurance: $120-200 a year (per suite)
• Property taxes: $400-800 a year (per suite)
• Utilities: $100-1200 a year in cities like Alberta, $600 in cities like BC where most of the tenants pay for their own room-heating using electric baseboards, and $1500 a year in cities in the Maritimes having inefficient oil burners and 80-year-old piping.
  
• Onsite manager: $25-50 per month (per suite), as per the property size
• Repair and maintenance: the current rent-roll is estimated, using various criteria, at a typical value of about $500-600 a year (per suite).
  It may be even lower for new properties and higher for the older ones.
  
• Property management fee: 4-6% of rent, as per the property size
• Miscellaneous: $100-150 a year (per suite) for advertisements and accounting

Keeping these into account, you can go ahead and obtain finance for your investment in multi apartment blocks with assurance of solid returns for a long time to come.