The State of the Mortgage Market for Multifamily Properties - Interview with Mortgage Broker.Oct 25, 2020
In this post, I talk to Nadeem Keshavjee, a mortgage broker with Canada ICI, about the state of the mortgage market for multifamily properties during COVID-19.
Nadeem will be attending my upcoming virtual workshop from October 30 to November 1, 2020.
He indicated that since the beginning of the pandemic in March 2020, more funds were available for apartment buildings for CMHC-insured financing than from conventional lenders (non-CMHC-insured). Because of that, CMHC was hit with an immense surge of financing applications which resulted in very long turnaround times up to three months.
As a result, last summer, CMHC issued guidelines restricting the use of funds on refinancing applications, or equity take-outs (see our blog post dated September 22, 2020) as a means to reduce the volume of applications.
Interest rates for CMHC-insured financing for quality borrowers and assets and in large centres for loan amounts in the range of $5M to $10M can be in the low 1% range and around 1.8% for smaller loan amounts in the $2M range.
The extremely low cost of funds translates into a fast reduction of the principal amount. In other words, investors are able to create significant equity much faster.
As you may know, getting CMHC-insured financing is a pain in the butt as it is very demanding to obtain, plus the long turnaround times mentioned above. However, investors benefit from lower interest rates compared to conventional financing.
The spread between these two types of financing remains between 1% to 1.25% for quality assets located in larger centres and quality borrowers. However, the spread can be as high as 2% for conventional financing for lower quality assets and borrowers in smaller centres.
When it comes to the Alberta multifamily market, conventional lenders consider Alberta a higher risk market and as such, they apply a risk premium in the range of 20 to 30 bps. This being said, for smaller assets, there are great opportunities at lower prices whereas the market is quiet on institutional larger deals.
Overall, apartment buildings of five-plus units, remain a very strong and low-risk asset class that continues to perform even in times of crisis such as the current pandemic because of their counter-cyclical nature. And as mentioned above, investors can build significant equity in record time because of the ridiculously low-interest rates.
Nadeem once again will be contributing to my workshop by providing additional case studies of actual deals that he will crunch the numbers for with my students.
The format of the entire workshop is EXPERIENTIAL, which is giving students the ability to learn by DOING IN CLASS as much as possible which in this case looking at actual real case studies, including some of my personal deals, and crunching the numbers. There is no other course like this in Canada.
The EARLY BIRD PRICING has been extended until October 30, 2020. In addition, the first 15 students who registered will be able to take part in a PRIVATE GROUP COACHING PROGRAM with me.
Here is what some of my graduate students had to say about the workshop: