MLI Select numbers
The 1.10 debt coverage test, and why many 8-plexes miss it.
CMHC wants a building to earn at least 1.10 times its mortgage payment. High leverage and today's rates make that harder than most ads suggest.
The formula
Debt coverage is net operating income divided by the year's mortgage payments. Net operating income is rent minus vacancy, tax, insurance, utilities, repairs and management.
A worked example
Take an illustrative $3M, 8-unit building grossing $17,000 a month, with 95% financing, a 5.55% premium and 50 years:
| Cautious | Best case | |
|---|---|---|
| Rate | 5.25% | 4.35% |
| Expenses | 30% of rent | 25% of rent |
| Monthly payment | $14,074 | $12,229 |
| Monthly cash flow | -$2,174 | $521 |
| Debt coverage | 0.85 | 1.04 |
Same building, very different answer. Before you trust any pro forma, check the rate date, the expense ratio and where the rents came from.
What moves it
- Price: the biggest lever, and sometimes negotiable with a builder.
- Rents: signed leases or market appraisals, not hopes.
- Rate: quotes change, so get a current one.
- Down payment: putting more in can get a building over the line.
Estimates only, not financial advice. Financing is subject to CMHC and lender approval. Program details are a summary of CMHC's published criteria as of October 2026 and may change. Rob Thomson is not a mortgage broker or lender.
Common questions
What if a building comes up short?
Lower the price, raise the rents with evidence, put more down, or walk away.
What rates should I use?
A current quote from a lender. Published bank rates are for regular home mortgages and do not apply to these files.
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