Ugo Bizzarri’s Timbercreek Asset Management Inc. already owns 9,000 apartment units, mostly in southern Ontario, but also in Ottawa, Halifax and Montreal. The firm is in expansion mode, but the last place you’ll see it raising money is in the public markets.

“Apartments are very predictable and very stable,” says Mr. Bizzarri, who has been investing in the apartment sector for about 10 years on behalf of institutional investors.

While stock markets have been anything but stable, apartment buildings generally held their value through the recession because of steady financing, low vacancy rates and a supply-constrained environment created by government regulations.

All the water-cooler talk may be about the red-hot housing market, but as apartment owners are quick to point out, about one-third of Canadians still don’t own.

Apartment vacancy rates across Canada remain relatively low — 2.7% in April 2009, according to Canada Mortgage and Housing Corp. That was slightly up from the 2.6% of apartments vacant a year earlier.

“Unlike an office building, you don’t have one big tenant like a bank that goes away, you have 1,000 tenants with a thousand leases. They are not going to all leave at once,” says Mr. Bizzarri.

At the same time, government rules such as rent control mean few apartments will be built, leaving the existing stock in high demand. Moreover, mandated rent increases are part of the landscape in most rent-controlled environments. The average two-bedroom apartment was renting for $827 a month in April, up about 2.9% from a year ago.

“But it’s also hard to find product because they don’t often come up for sale,” says Mr. Bizzarri, who recently bought a 10-building portfolio in London, Ont.

Derek Lobo, chief executive of Burlington, Ont.-based Rock Apartment Advisors Inc., says the apartment sector has quickly turned into a seller’s market with multiple offers and, in some cases, buyers even pre-inspecting property so they can go in with firm offers.

Statistics back up his claim. Research firm RealNet Canada Inc. said the apartment market has seen four straight quarters of increases in transactions of more than $1-million, based on total dollars. The fourth quarter of this year has already seen $277-million in deals, a sharp jump from the $117-million in activity in the first quarter, but a far cry from the peak of $799-million in fourth quarter of 2006.

Mr. Lobo said some landlords don’t want to sell in this environment because of the steady cash flow. “Apartments trade less because of their stability,” said Mr. Lobo, who has spent the past two years building a massive database of apartment buildings across the country partially for the purpose of approaching landlords to sell. His company wants to hit the sellers even before they list their properties.

Although there are large, publicly traded entities in the game, such as Boardwalk Real Estate Investment Trust and Canadian Apartment Properties REIT, approximately 90% of the apartment buildings in the country are still in the hands of “mom and pop” owners.

CMHC has made it relatively easy to finance the ownership of an apartment building for Canadians. The agency backs loans for individuals who sign a personal guarantee with as little as 15% down. That mean you can buy a small $1-million building with just $150,000.

Availability of credit is one thing, but it’s the cheap money that makes most transactions work. The interest rate on a CMHC-backed loan is as little as 3.5% for a five-year mortgage or 4.5% for a 10 year. A conventional mortgage, if you could find one, would be about 200 basis points higher for both terms. If you are borrowing at 3.5% and your return on that cash is 6% to 7% — the average in the Toronto area — that spread is making you money.

“During this whole credit crisis we’ve been quite busy because we are one of the only ones to have funds available,” says Peter Cook, assistant vice-president of commercial lending of First National Financial LP. “From a company standpoint we’ve had our biggest year ever.”