Value Add CMHC MLI-Select Apartment Building Financing Strategy

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In this episode, Scott is joined by Jennifer Champion and Christine Traynor to discuss value-add strategies for multi-family apartment buildings. The hosts share their active investing experience and explain how to force appreciation through strategic property improvements and rent optimization.

Key Timestamps: [0:00] Introduction to Value-Add Multi-Family Investing

• Focus on forcing appreciation vs. just cashflow
• Why controlling income and expenses matters in multifamily
• Predictable refinance outcomes

[2:30] 💰 Forcing Appreciation Strategy

• Raising rents to market value
• Controllable income and expense factors
• Difference from single-family appreciation methods

[4:15] 📊 Real World Case Study Example

• $1.5 million purchase price
• $200,000 renovation investment
• $2.1 million stabilized value
• 75% LTV refinance at $1.57 million
• Creating infinite returns with zero capital remaining

[7:00] 🏦 Understanding the Two-Loan Strategy

• Bridge loan benefits (interest-only payments)
• Takeout financing for long-term refinancing
• CMHC standard and MOI select options
• Higher loan-to-value possibilities

[9:30] 🌍 Market Selection Considerations

• Landlord-friendly markets like Alberta
• Challenges with rent-controlled markets
• U.S. market opportunities for this strategy

Key Concepts Covered:

Value-Add Strategy Fundamentals:

• Forcing appreciation through property improvements
• Raising rents to market rates
• Creating predictable refinance scenarios
• Achieving infinite returns through strategic refinancing

Two-Loan Structure: Bridge Loan Phase:

• Interest-only payments during stabilization
• Lower carrying costs during renovation period
• Short-term financing solution

Takeout Financing:

• Long-term conventional or CMHC financing
• 5-year terms available
• Access to created equity
• Higher loan-to-value options

Investment Mathematics: Real Example Breakdown:

• Initial investment: $1.5 million purchase + $200,000 renovations
• Total invested: $1.7 million
• Stabilized value: $2.1 million
• Refinance proceeds: $1.57 million (75% LTV)
• Capital recovered while maintaining ownership

Market Selection Criteria: Ideal Markets:

• Landlord-friendly jurisdictions
• Ability to raise rents to market rates
• Limited rent control restrictions
• Strong rental demand fundamentals

Challenging Markets:

• Heavy rent control regulations
• Limited ability to increase rents
• Restrictive landlord-tenant laws

Strategic Advantages:

• Tax efficiency (appreciation vs. taxable cashflow)
• Predictable returns compared to single-family
• Scalable strategy for portfolio growth

Important Considerations:

• Calculate closing costs for both loan transactions
• Factor in all fees and expenses
• Ensure market fundamentals support strategy

Resources Mentioned:

• Book A Call With Jennifer
• Book A Call With Christine

Important Note: This strategy requires careful market analysis and proper financing structure. Investors should

Book A Strategy Call With An Expert On The Team

Support the sho

Episode Transcript

Scott Dillingham (00:00):
Welcome back to the Wisdom Lifestyle Money
Show.
I'm your host, ScottDillingham.
Today we have our nextinstallment of the commercial
investing topics that we, wetold you we're gonna go over and
I'm really excited abouttoday's.
I have Jennifer champion andChristine Trainor on with us,
and we are going to talk aboutvalue add for multi-family

(00:21):
apartment buildings andstrategies and.
How this is a game changingtopic.
So I'll turn it over to you,Jennifer and Christine.
So welcome.

Jennifer Champion (00:30):
Thanks Scott.

Scott Dillingham (00:32):
Yeah, you're welcome.

Jennifer Champion (00:32):
Okay.
So one thing that I reallywanna touch on, I think that
when people go into multifamily,they focus a lot on cashflow.
And yes, cashflow is great, butyou are also taxed on cashflow.
So today we just really wannatalk about forcing appreciation
and how you can do that in themultifamily space.
So one of the best ways to dothat is to be raising rents, to

(00:56):
market rents very different thanin the single family space.
When you are raising yourincome and lowering your
expenses in multifamily, it'sall very controllable and you
can really predict like whatthat refinance is going to look
like.
Whereas in single family, it'sreally based on your comparables
and the houses around you.

(01:16):
So a, a really straightforwardexample is, say you buy a
apartment building for $1.5million.
You put $200,000 intorenovations, and then you
stabilize all the rents in yourbuilding to market rents, and
your property is now worth $2.1million.

(01:36):
So you go to refinance thatproperty at just 75% loan to
value, and your new loan isworth $1.57 million.
So with this strategy, you havetaken out your original capital
and created equity in theproperty.
Of course, you know we can getinto other products.

(01:57):
Like CMHC standard and MOIselect, which allows you to do
higher loan to values.
But right there you've turned abuilding.
You now own it essentially with$0 out of your pocket and the
returns are infinite.

Scott Dillingham (02:12):
That's awesome.
I love it.
So.
Could you explain, because forthe investor who's thinking of
this, they might just wannaapply and think that they can
get renovations and it's allgood to go.
And, but there's, there'sdifferent steps there.
What are the two differenttypes of loans, because we need
two loans for this type ofproduct.
Ideally.

(02:33):
So could you explain what thoseare for an investor who's
listening.

Jennifer Champion (02:37):
Yeah, so depending on, you know, the
strength of the numbers onpurchase, you can use a credit
union and go 75% loan to value.
You know definitely a betterstrategy is to do what we call a
bridge loan.
So they're interest onlypayments.
You know, and then that you'reusing those interest only
payments to keep your costs downwhile you're stabilizing the

(03:00):
building.
And then we call it, once yougo to refinance, it's basically
called takeout financing.
So this is like your long-termfinancing, five year term,
either conventional or CMHC toaccess the equity that you've
created in that building.

Scott Dillingham (03:17):
Exactly.
Yeah.
So Jennifer nailed it guysthere.
So there, there, there is thetwo mortgages.
So keep that in mind, right,because when you're running your
profits, you have to calculatelike the fees, the closing
costs, all that stuff.
And that's gonna happen twice.
So great, great strategy and Iknow Jennifer and Christine,
right?
Both of you are activelyinvesting in this strategy.

(03:38):
So I really like that.
Not only are you talking aboutit today, but it's literally
what you're doing.
So I think that's superimportant.
So what we're gonna do foranybody who's listening to this
that wants more information orlove this idea and, and wants to
move forward with it, we'regonna have.
Jen and Christine's Calendlylinks into the, into the

(04:00):
description there so you canbook a call with them and
discuss the strategy for yournext investment.
Did you guys have anything elseto add to this strategy or
anything else that we shouldknow about?

Christine Traynor (04:12):
I.
The only thing I was gonna add,Scott, is that it's also a
piece of it is looking atspecific markets where this
strategy works really well.
So typically that's like wherewe're seeing a lot of people
doing the strategy as landlordfriendly markets like Alberta
where you can go in and increasethose rents.
It is a little bit morechallenging in other markets
where you have a little bit moreyou know, rent control and that

(04:34):
kind of thing.
And it's also a great strategythat we're seeing people use in
the US as well.

Scott Dillingham (04:40):
Awesome.
Love it.
Yeah.
Thanks for sharing.
So appreciate it guys.
I'm definitely looking forwardto next week's topic.
I, I know it's gonna be anexciting one and we can't wait
to share it with everybody here.
So thanks so much for joiningus.
Thanks, Scott.