The client
An investor with four existing conventionally financed rentals in the Red Deer market wanted to add a fourplex — the fifth financed property — to the portfolio. Rental demand in the region, tracked in the same national vacancy data cited across this file, supported all four new units renting immediately.
Applicant
Existing 4-property investor
$8,700/month personal employment income
New purchase
$780,000 fourplex, Red Deer
All four units pre-leased at closing
Down payment
$195,000 — 25%
Conventional; structured for a four-unit investment purchase
New combined rent
$5,500/month
Across all four units
Existing debt
$460/month auto loan
Carried in both scenarios below
Existing portfolio
4 rentals, already financed
Cash-flow positive; excluded from the ratio test below
The new fourplex on its own, before either rental-income treatment is applied:
| New purchase structuring | Amount |
|---|---|
| Purchase price | $780,000 |
| Down payment (25%) | −$195,000 |
| Loan amount | $585,000 |
| Combined signed rent, four units | $5,500/mo |
The problem
The first hurdle was not a ratio at all. Lender A's own appetite for individually-financed rental properties — each lender sets its own limit — meant a fifth financed property was already past what it was comfortable carrying for this borrower, regardless of the numbers. The second hurdle showed up once a lender willing to consider the file at all was found: a conservative add-back on the new, unseasoned fourplex.
The add-back arithmetic on the new property alone
- ▸Income used: $8,700 + $2,750 (half of the $5,500 combined rent) = $11,450/mo
- ▸Liabilities: $4,704 full carrying cost + $460 car loan = $5,164/mo
- ▸TDS on the new property alone: $5,164 ÷ $11,450 = 45.1% — over the 44% ceiling. Declined.
The existing four rentals were already cash-flow positive and were not the problem — the new, unseasoned fourplex, tested on a conservative add-back with no operating history yet, was.
The numbers
The fourplex is tested on its own numbers: the borrower's existing portfolio is already comfortably covered and does not change under either treatment below.
| Rate and payment on the new fourplex | Amount |
|---|---|
| Contract rate — 5-year fixed conventional (illustrative, not a quote) | 5.24% |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 7.24% |
| Monthly P&I at the qualifying rate — the ratios run on this | $4,184 |
| Monthly P&I at the contract rate — what is actually paid | $3,483 |
Full carrying cost on the new property
| Carrying cost | Monthly |
|---|---|
| P&I at the qualifying rate | $4,184 |
| Property tax | $520 |
| Full carrying cost (heat is tenant-paid) | $4,704 |
Lender A's 50% add-back on this new, unseasoned property is contrasted below with a portfolio-specialist lender's 80% offset, applied to the new fourplex alone.
| TDS line (new property only) | Lender A — 50% add-back | Portfolio lender — 80% offset |
|---|---|---|
| Income used | $11,450 (incl. half of rent) | $8,700 (no rent added) |
| Full carrying cost / shortfall | $4,704 (full) | $304 (shortfall after offset) |
| Car loan | $460 | $460 |
| TDS | 45.1% ✗ | 8.8% ✓ |
With $4,400 of the $5,500 combined rent offset directly against the $4,704 carrying cost, only a $304 shortfall reaches the liabilities — the mechanic behind why portfolio-specialist lenders can keep scaling an investor past the point where a per-file add-back cannot, as mapped generally in our comparison of rental income offset methods.
The solution
A RECA-licensed Alberta mortgage broker moved the file to a lender that specializes in portfolio landlords: no headcount-style limit on individually financed properties, and an 80% offset treatment applied per property rather than a flat add-back, consistent with the underwriting approach set out in our rental-property underwriting guide. The existing four rentals were documented, not re-underwritten from scratch, since the portfolio lender's process nets each property's own numbers, and a rough cap rate check on the fourplex confirmed the purchase price was reasonable against its rent roll before the file was submitted.
The package focused entirely on proving the new fourplex on its own merits:
The portfolio lender's underwriter needed to see that the new property could stand on its own once the offset was applied — and, separately, that the existing four properties were current and cash-flow positive, not that a single lender's ratio math could absorb the whole relationship at once.
The outcome
Approved and funded: $585,000 conventional at 75% LTV, 25-year amortization, 5-year fixed term, becoming the investor's fifth financed rental property.
Alberta has no land transfer tax; Land Titles Office registration fees on the transfer and the mortgage were charged on a sliding scale and quoted by the lawyer as part of closing rather than itemized here.
What to take from this file
- 01A decline can be about appetite, not arithmetic. Lender A's limit on individually-financed rental properties was a policy ceiling, unrelated to whether the numbers actually worked.
- 02A new, unseasoned property is judged more conservatively than a proven one. The existing four rentals were never the issue here — the fifth, with no operating history yet, was tested the hardest.
- 03Portfolio-specialist lenders solve a problem mainstream add-back policy cannot. An 80% offset applied per property let this investor keep scaling past where a flat 50% add-back would stop them.
- 04Test the new acquisition on its own numbers first. Isolating the fourplex's own TDS made the actual decision point — the rental-income treatment — visible instead of buried in a full portfolio recompute.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸5.24% contract rate — rates move daily; not a quote.
- ▸Lender A's limit on individually-financed rental properties — each lender sets its own portfolio/exposure appetite; this is not a regulatory rule.
- ▸25% down / conventional structuring — each lender sets its own down-payment requirement for a four-unit investment purchase.
- ▸50% add-back / 80% offset treatments — each lender publishes its own rental-income policy.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.