Built or bought: two different applications
A fourplex you build and a fourplex you buy look the same from the street and nothing alike to a lender.
Building one is a construction loan: a budget on the lender's template, a builder and a contract, draws (stage payments released as the build reaches each milestone) against inspections, and an appraisal of the finished building. The lender is backing a plan.
Buying one is a mortgage on an income property: the rent roll (the list of units, tenants and rents), the leases, the operating costs, the building's condition and your own finances. The lender is backing a building that already earns.
Different lenders, different documents, different timelines. Lendrite arranges both, and the first call sorts out which one you are. Two or three homes on one lot is covered on duplex and garden suites. Book a 20-minute call →
Partners, guarantors and corporate borrowers
Small multi-family projects are often two or three people, or a company, rather than one borrower. That is normal, and it adds a layer of questions: who owns what share, who signs personally for the loan, and where each person's part of the equity comes from.
When a company is the borrower, lenders usually ask its shareholders to sign as guarantors, meaning each of you is personally responsible if the company cannot pay. The corporate records, the shareholder register and a personal net worth statement for each guarantor go in with the application.
Partners without a company need a written agreement that says how costs, decisions and proceeds are shared. A lender reads the absence of one as a risk. If you have not written it yet, do that before the application, and have a lawyer look at it.
Appraisals for strata units
A four-unit building can be held on one title and rented, or stratified so that each unit has its own title and can be sold on its own. The appraisal depends on which you intend.
Built to sell as strata units, the appraiser values each unit against recent sales of similar homes nearby and adds them up. Built or bought to hold, the appraiser values the building as a whole, on the income it earns and on sales of similar buildings. Lenders often ask for both, and lend against the lower.
The appraiser needs the plans, the unit sizes and layouts, the strata plan you intend to register, and the rents you expect. The strata plan has to be registered at the Land Title Office before any unit can be sold separately, which sets the timing of your exit and of the lender's payout at the end.
The questions lenders ask
We answer each of these in the application before it goes in.
| The question | What answers it |
|---|---|
| Who is building it, and what have they finished? | The builder's résumé, licence and warranty enrolment, with the addresses of recent projects. |
| Is the land owned, and is the permit issued? | Title or purchase contract, and the permit status in writing from the municipality. |
| Where does the equity come from? | Ninety days of bank statements for cash, the appraisal for land equity, and each partner's contribution set out. |
| Is the contract fixed price? | The builder's contract, or the project management agreement with its scope and fee. |
| What happens if it runs over? | The contingency line, and the net worth statements showing what sits behind it. |
| What is the exit? | A market appraisal for strata sales, or a rent roll and operating budget for a hold. |
| Who signs? | The corporate records, the shareholder register and a net worth statement for each guarantor. |
| Have you done this before? | Your own résumé as the developer, with the projects and how they ended. |
What to bring, by route
On top of the income, ID and down payment documents on the document checklist.
Building it
- The budget on the lender's template
- The builder's contract and the plans
- The builder's résumé and your own
- Permit status and zoning confirmation
- Corporate records if a company owns the land
- A personal net worth statement for each guarantor
Buying it
- The rent roll and the current leases
- The operating statements the seller has
- Property tax notice and insurance
- A building inspection or condition report
- The purchase contract, and the strata plan if one exists
- Corporate records and net worth statements, as above
Costs are gone through with you upfront, before you commit to anything. The process from there to funding is on how it works.