Multi-Unit Property Financing: Duplexes, Triplexes & Fourplexes

You want to house hack—live in one unit and rent out the others to cover your mortgage. Or maybe you're building an investment portfolio and multi-units offer better cash flow than single-family homes. Either way, financing duplexes, triplexes, and fourplexes works differently than single-unit properties. Here's what you need to know.

Why Multi-Unit Properties?

Multi-unit residential properties (2-4 units) offer unique advantages:

For Owner-Occupants (House Hackers)

• Rental income covers part or all of your mortgage
• Lower down payment than pure investment
• Build wealth while living essentially "free"
• Learn landlording with minimal risk

For Investors

• Better cash flow than single-family rentals
• One property = multiple income streams
• Economies of scale (one roof, one lot)
• Potentially easier management (all units in one location)

Down Payment Requirements

Down payments vary by occupancy and number of units:

Owner-Occupied (Living in One Unit)

Owner-occupied means you live in one unit as your principal residence.

Non-Owner Occupied (Pure Investment)

No CMHC insurance available for investment properties.

How Rental Income Is Counted

Lenders count rental income to help you qualify, but not at 100%:

Typical Rental Income Calculation

50% Rule (Conservative):

• Lender uses 50% of rental income
• Accounts for vacancies, maintenance, management

Add-Back Method:

• Add 50% of rents to your income
• Subtract property expenses

Example: Triplex Purchase

• Your income: $80,000/year
• Two rental units: $2,500/month combined
• Rental income credited: $2,500 × 50% = $1,250/month or $15,000/year
• Effective income for qualification: $95,000

Qualification Considerations

Debt Service Ratios

With rental income factored in:

• GDS (Gross Debt Service): Housing costs ÷ Gross income ≤ 39%
• TDS (Total Debt Service): All debts ÷ Gross income ≤ 44%

Multi-unit rental income helps these ratios significantly.

The Stress Test

You still must qualify at the stress test rate (contract rate + 2% or benchmark, whichever is higher).

Property Appraisal

Lenders appraise based on:

• Comparable sales
• Income approach (rent × capitalization rate)
• Condition and location

Financing Options

Conventional Mortgage (CMHC Insured)

For owner-occupied:

• Lower down payment possible
• Best rates available
• CMHC premium applies
• Must be 1-4 units

Conventional Mortgage (Uninsured)

For investment or 20%+ down:

• 20% minimum down
• Competitive rates
• Standard qualification

Portfolio/B-Lender

When conventional doesn't work:

• Flexible income verification
• Credit-challenged borrowers
• Higher rates, more options

Commercial Financing

For 5+ units:

• Different qualification criteria
• Commercial mortgage rates
• Assessed as business, not residential

Key Considerations for Multi-Unit Buyers

Legal Conformity

Ensure all units are legal:

• Proper zoning
• Building permits for conversions
• Fire code compliance
• Separate addresses/units in tax records

Warning: Illegal suites can be shut down, destroying your rental income.

Utility Separation

Separate meters simplify landlording:

• Tenants pay own utilities
• Easier expense tracking
• More accurate cash flow projections

Financing the Extras

Multi-units often need:

• Larger reserves for repairs
• Property management budget
• Vacancy allowance
• Insurance considerations

Exit Strategy

Know your options:

• Sell as multi-unit
• Convert to single-family
• Condo conversion (where allowed)

Multi-Unit Due Diligence Checklist

Before buying, verify:

✅ All units are legal and permitted
✅ Zoning allows current use
✅ Current rent rolls are accurate
✅ Tenant leases are transferable
✅ Utilities are appropriately metered
✅ Fire/safety requirements are met
✅ No deferred maintenance issues
✅ Insurance is available and affordable
✅ Property taxes reflect multi-unit status

FAQ

Q: Can I rent to family and still get rental income credit?
A: Lenders are cautious about this. Arm's-length tenants are easier to document.

Q: What if I want to live in one unit now but rent it later?
A: You can change to full investment later, but may need to refinance if your mortgage was owner-occupied only.

Q: Do I need landlord experience?
A: No, but lenders may ask about your management plan. Consider property management for your first property.

Q: How does condo multi-unit work?
A: Some condos are split into multiple units but sold as one. Rules vary—verify with condo corporation.

Q: Can I use RRSP funds for down payment on a multi-unit?
A: Yes, through the Home Buyers' Plan if it's owner-occupied and you're a first-time buyer.

Q: What about 5+ unit buildings?
A: These typically require commercial financing, which has different criteria and rates.

What's Next

Multi-unit properties are a powerful wealth-building tool. Get pre-approved to see how much multi-unit property you can afford and how rental income expands your options.