"Let’s Just Turn It Into a Rental!" — Famous Last Words

Why converting a condo project into a purpose-built rental almost never works — and what that says about our broken system.

Somewhere in a downtown boardroom right now—probably with a view of the CN Tower and a $300 sushi tray slowly drying out—a developer is nervously scrolling through his pro forma while a lender leans back in a Herman Miller chair and says:

“Well… why don’t you just turn it into a rental?”

Cue the silence. Eyebrows raise. Someone shifts uncomfortably in their chair. Nobody wants to be the one to say what everyone’s thinking:

It doesn’t work.

Not financially. Not practically. And legally? It’s a nightmare.

I’ve seen it. I’ve lived it. (Not the improv routine).

We all want it to pencil out. After all, rental housing is the golden child right now—government-backed, CMHC-blessed, politically palatable. But the truth is, trying to convert a condo project into a purpose-built rental is like trying to retrofit a Tesla into a cement truck. Wrong shape. Wrong tools. Wrong job.

Let’s break down why this move usually signals the end of the line, not a fresh new beginning.

1. The Math Never Maths

You bought the land based on condo values. You designed based on condo finishes. You planned to sell, not to hold. And now you want to rent?

Okay. But here’s the thing: condos are priced for exit velocity. Rentals need to cash flow.

Let’s say your blended rent comes in at $5 per square foot per month. Great. Now subtract:

• Operating costs (approx. 25–30% of revenue)

• Property taxes

• Interest on construction and takeout loans (which are not free, by the way)

• Capex reserves

• Leasing commissions and tenant incentives

• 3% vacancy allowance (if you’re lucky)

Your once-sexy IRR becomes a limp 2.3% unlevered yield. And that’s before you deal with…

2. The Wrong Specs for the Job

Condos are built to sell. Rentals are built to survive.

Condos have:

• High-end appliances that tenants will lovingly destroy

• Fragile finishes that require constant repairs

• Expensive layouts designed to wow buyers, not maximize NOI

• Parking ratios, suite mixes, and amenity spaces that make no sense in a rental scenario

It’s like designing a Ferrari and then trying to use it as an Uber XL. You can do it… but why?

3. Financing Will Gut You

When you switch to rental, your loan-to-cost ratio tanks. Why?

Because lenders look at stabilized value now—not projected sales.

And stabilized value is derived from your NOI, which is low because (see above) you’re using condo plans.

So now you need more equity. But guess what? You already spent it. You bought the land in 2021 like a rockstar with bottle service, not a pension fund buying a strip mall in Sarnia.

4. CMHC Is Great... Until It Isn’t

Sure, CMHC-insured takeout loans are amazing. But the road to get there is paved with delays, red tape, and underwriting standards that feel more like a colonoscopy.

And to qualify, you’ll need:

• Lower rents

• Longer hold periods

• More affordable units

• Upfront compliance with accessibility, sustainability, and sometimes even unicorn-friendly design standards

Did I mention this can delay your construction start by 9 months?

By the time you get approved, your forming crew will have already quit and become AI prompt engineers.

5. Your Agreements Don’t Let You Pivot

If you’ve sold even one unit, you’re handcuffed. Tarion registration, disclosure statements, pre-con APSs, syndication documents, marketing materials—it's all baked in.

Even if you haven’t sold yet, your structure might be locked in legally and financially.

And don’t forget the lawyers. They’ll bill you five figures to tell you something you already knew: “It’s complicated.”

Final Thoughts

If a project was designed, financed, and capitalized as a condo, trying to pivot it to rental is like trying to turn a speedboat into a submarine—midway through the Atlantic.

Stop pretending the model works.

Either we build rentals from day one, or we accept that not every condo can be saved.

So the next time someone says “just convert it to rental,” do what I do: smile politely, nod, and walk away before the madness infects your spreadsheet.