[GUEST ACCESS MODE: Data is scrambled or limited to provide examples. Make requests using your API key to unlock full data. Check https://lunarcrush.ai/auth for authentication information.]  Daniel Foch [@daniel_foch](/creator/twitter/daniel_foch) on x 46.7K followers Created: 2025-07-09 17:02:45 UTC Government-insured purpose built rental housing starts are surging in Canada. The majority of these projects are using 50-year amortizations to work. (CMHC MLI Select is by far the leading mortgage type) While this is a huge win for supply and affordability, it deserves a lot of caution for investors. Investors can cash flow a yield-on-cost in the X% range with this product - this has kept multifamily values propped up artificially. It allows investors to do this because they're paying way less principal each year, reducing their mortgage payment. They also only need a DSCR (debt-service coverage ratio) in the XXXX range, which means the asset only needs to be XX% cash-flow positive. On top of that, these loans allow downpayments as low as 5%. This means the margin for error on these projects is very small, and the risk exposure is very large relative to equity. These projects make sense (or made sense) in an environment when rents and valuations were rising, and vacancies were falling. The investor (and CMHC) would shoulder the risk for a 5- or 10-year term and then hopefully have equity built up after that from increasing valuation via rent growth, and a small amount of principal paydown. CMHC acknowledged this risk and implemented the rental achievement holdback, where they will reduce your loan if your income is lower than you forecasted on your application. For example if your NOI is XX% of your forecast, your loan will drop accordingly. This trapped a lot of investors who underwrote forecasted incorrectly. This is fine for big investors with staying power (who the product is designed for). It has become a big problem for small investors who were buying into these deals because they could do it with X% down. So they also reduced this risk by increasing the liquidity requirement. Many of these projects can and will create generational wealth. Just as many of them will destroy it. If you turn this into the next precon market, it will end in the exact same fashion as the last precon market.  XXXXX engagements  **Related Topics** [cash flow](/topic/cash-flow) [canada](/topic/canada) [Post Link](https://x.com/daniel_foch/status/1942992833839009990)
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Daniel Foch @daniel_foch on x 46.7K followers
Created: 2025-07-09 17:02:45 UTC
Government-insured purpose built rental housing starts are surging in Canada.
The majority of these projects are using 50-year amortizations to work.
(CMHC MLI Select is by far the leading mortgage type)
While this is a huge win for supply and affordability, it deserves a lot of caution for investors.
Investors can cash flow a yield-on-cost in the X% range with this product - this has kept multifamily values propped up artificially.
It allows investors to do this because they're paying way less principal each year, reducing their mortgage payment. They also only need a DSCR (debt-service coverage ratio) in the XXXX range, which means the asset only needs to be XX% cash-flow positive.
On top of that, these loans allow downpayments as low as 5%.
This means the margin for error on these projects is very small, and the risk exposure is very large relative to equity. These projects make sense (or made sense) in an environment when rents and valuations were rising, and vacancies were falling. The investor (and CMHC) would shoulder the risk for a 5- or 10-year term and then hopefully have equity built up after that from increasing valuation via rent growth, and a small amount of principal paydown.
CMHC acknowledged this risk and implemented the rental achievement holdback, where they will reduce your loan if your income is lower than you forecasted on your application. For example if your NOI is XX% of your forecast, your loan will drop accordingly. This trapped a lot of investors who underwrote forecasted incorrectly. This is fine for big investors with staying power (who the product is designed for). It has become a big problem for small investors who were buying into these deals because they could do it with X% down. So they also reduced this risk by increasing the liquidity requirement.
Many of these projects can and will create generational wealth.
Just as many of them will destroy it.
If you turn this into the next precon market, it will end in the exact same fashion as the last precon market.
XXXXX engagements
