4 best ways to finance real estate in 2025

In the ever-evolving landscape of real estate investment, financing strategies continue to adapt to market conditions, regulatory changes, and economic shifts. My recent podcast episode with Nick explored four game-changing financing methods that are reshaping how investors approach property acquisition in 2025.

As we navigate a unique market environment, understanding these financing options can mean the difference between capitalizing on opportunities and missing out on potential deals. Let's dive into these innovative strategies that are giving savvy investors a competitive edge.

1. The Return of Vendor Take Back Financing

Not seen at this scale since the 2008 financial crisis, Vendor Take Back (VTB) financing has made a dramatic comeback in today's market. This seller-assisted financing option occurs when property sellers act as lenders, offering part of the purchase price as a loan to buyers.

The resurgence of VTBs signals a significant shift in market dynamics, creating opportunities for investors who understand how to leverage this financing method.

Key Benefits of VTB Financing:

• Enhanced negotiation leverage for both price and terms
• Simplified qualification process compared to traditional bank financing
• Access to properties that might be considered "unbankable" through conventional methods
• Potential tax advantages for sellers through income spreading

VTBs are particularly powerful for commercial properties, distressed assets, or unique properties that traditional lenders hesitate to finance. For investors facing credit challenges or looking to close quickly, this financing option provides flexibility that conventional mortgages simply can't match.

2. The Canadian Secondary Suite Loan Program

In response to housing shortages nationwide, the Canadian government has introduced an innovative loan program designed to increase rental housing stock while providing homeowners with additional income opportunities.

Starting January 15, 2025, eligible homeowners can access low-interest loans of up to $80,000 to create secondary suites such as basement apartments, garden suites, or laneway houses. These loans are repayable over 15 years, making them an attractive option for property owners looking to maximize the value of their existing assets.

Program Highlights:

• Eligible homeowners must already own the home and either occupy one unit or have a close relative living in one
• Loan funds must be used specifically for secondary suite construction
• Created units must comply with municipal zoning requirements
• The additional unit must be used for long-term rental purposes (not short-term rentals like Airbnb)

This program represents a unique opportunity for homeowners to increase property value, generate rental income, and contribute to addressing Canada's housing shortage – all with government-backed financial support.

3. 90% Insured Refinance Program

Perhaps the most exciting (but also mystified) development for 2025 is the new 90% insured refinance program. This initiative allows eligible homeowners to access up to 90% of their improved property value (capped at $2 million) to finance secondary suite construction.

The program significantly expands borrowing potential for property owners, particularly in high-value markets where traditional refinancing options might be more limited. By extending amortization periods to 30 years, this program makes payments more manageable while maximizing leverage.

While lender participation is still developing, BMO has emerged as an early adopter of this program. As other financial institutions recognize its potential, we expect broader availability throughout 2025.

4. Construction Loans and CMHC MLI Select

For those looking to build from the ground up or undertake major renovations, construction loans provide specialized financing disbursed progressively during building phases. These loans require detailed planning, strong credit, and clear project timelines.

Complementing these construction options is CMHC's MLI Select term debt program, which offers preferential insurance premiums for energy-efficient and affordable housing projects. This program rewards sustainability and accessibility with meaningful financial incentives.

The Power of Combined Strategies

The most sophisticated investors are discovering ways to combine these financing approaches – creating powerful funding packages that maximize leverage while minimizing risk and capital requirements. For example, pairing VTB financing with the Secondary Suite Loan Program or utilizing Construction Loans with MLI Select can unlock opportunities that would otherwise remain inaccessible.

Looking Ahead: The Financing Landscape of 2025

The real estate financing environment is evolving more rapidly than we've seen in decades. These innovative financing methods are creating unprecedented opportunities for investors who take the time to understand and implement them effectively.

For those looking to expand their real estate portfolios in 2025, mastering these financing strategies will be essential to staying competitive in a changing market. Whether you're a seasoned investor or just getting started, these approaches can help you identify and capitalize on opportunities others might miss.

To learn more about these financing strategies and how to implement them effectively, join us for our upcoming real estate capital event, where industry experts will provide detailed insights and actionable advice. Check out https://www.eventbrite.ca/e/navigating-capital-financing-your-real-estate-investments-tickets-1064569809959?aff=Linkedin for registration details and additional resources.

Until next time, happy investing!