The low interest rates and the effect on the yield.

It seems that today’s multi-residential market is in a bit of a dilemma. With the interest rates being very low (a 5 year CMHC insured loan for amounts greater than 1 million dollars hovering at the low 3% ranges), the asking prices on the multi residential apartment buildings have gotten to be expensive where the buyers will have low returns on a return on investment (ROI) basis.

If looking to invest in apartment buildings, Locking a 3% loan for 5 years is very beneficial to the investor. Over those 5 years, at a 3% mortgage rate with a 25 year amortization, more than half the mortgage payment has gone to the principal. This fact should not be forgotten when crunching our yields.