Single Family vs Multi-Unit Investing (Real Life Example)

In this blog, we’ll be breaking down the differences between the purchase and cash flow of a single-family home and an MLI Select purchase. We'll compare initial investment costs, ongoing expenses, and rental income potential to give you a comprehensive understanding of how these two investment options stack up against each other. Whether you're a seasoned investor or just starting in real estate, understanding these differences will help you make informed decisions that align with your financial goals.

What is MLI Select Multi-Family Investing?

The MLI Select program, offered by the Canada Mortgage and Housing Corporation (CMHC), is designed to provide flexible mortgage loan insurance options for the construction, purchase, and refinancing of multi-unit residential properties. This program aims to encourage the development of affordable rental housing and improve the energy efficiency of existing rental properties. By comparing the costs and cash flows of single-family home investments and MLI Select investments, you'll see how the latter can provide significant financial advantages and contribute to the broader goal of enhancing affordable housing availability.

MLI Select vs Single Family Home Investment (Purchase)

Single Family Home Purchase 

Purchase price (20% down payment, mortgage amount $400,000) = $500,000

Down payment = $100,000

Land Transfer Tax = $6,475

Legal Fees = $2,500

Total cost on closing = $108,975

MLI Select Multi-Family Purchase

MLI purchase price (3 single-family homes, suited lower levels in Alberta, total 6 doors) = $1,500,000

Down payment (5% required on MLI purchase) = $75,000

Land transfer tax (no land transfer tax in Alberta) = $0

Appraisal fee = $3,500

Legal fee = $5,000

Commercial lending fee = $14,250

Total cost on closing = $97,750

As you can see, with the MLI Select program your initial investment would be over $10,000 less than if you were to just purchase a single-family home, and the value of the MLI select purchase is 3 times the value of the single-family home. 

A big reason for this is the fact that the MLI purchase only required a 5% down payment, which is a very big upside to this program.

MLI Select vs Single Family Investment Cash Flow

Single Family Home Cash Flow

Rent = $2,400

Mortgage payment ($400,000 mortgage, 5.25%, 30-year am) = $2,195

Taxes = $250

Insurance = $120

Utilities (tenant pays utilities in this example) = $0

Management (landlord manages in this example) = $0

Cash flow = - $165

MLI Select Multi-Family Cash Flow

Rent: $1950 x 3 upper level = $5,850

Rent lower: $1,100 x 3 = $3,300

Utilities = $600 x 3: $1,800

Total rent with utilities: $10,950

Mortgage payment: $1,464,900 CMHC included, 4.5%, 50-year amortization = $6,144

Taxes: $300 x 3 = $900

Insurance: $150 x 3 = $450

Utilities: $500 x 3 = $1,500

Management 8% of rent: $732

Cash flow: $1,224

Opting for the MLI Select program offers numerous advantages for investors looking to maximize their real estate investments. Unlike traditional single-family home purchases, MLI Select allows for a significantly lower initial investment due to its 5% down payment requirement, resulting in over $10,000 in savings at closing costs. This lower barrier to entry enables investors to leverage their capital more effectively, acquiring higher-value properties for less upfront cost.

Moreover, the cash flow potential of MLI Select properties is substantially higher. With multi-unit residential properties, rental income is diversified across multiple tenants, providing a more stable and robust cash flow compared to a single-family home. As demonstrated, the MLI Select property in our example generates a positive cash flow of $1,224, whereas the single-family home results in a negative cash flow of $165. This difference underscores the financial benefits of investing through the MLI Select program, particularly for those looking to build a profitable and sustainable rental portfolio.

In summary, the MLI Select program not only reduces initial investment costs but also enhances cash flow potential, making it an attractive option for real estate investors aiming to achieve greater financial returns and long-term growth. By facilitating the acquisition and improvement of multi-unit residential properties, MLI Select supports the development of affordable housing and energy-efficient living spaces, aligning financial goals with social impact.