How to Buy
Commercial Real Estate in Canada
Residential real estate can
be a great investment, but it isn’t right for everyone. For some people
investing in commercial real estate makes more sense. You can have multiple
streams of income coming in, all from under one roof. Here’s a look at how to
buy commercial real estate in Canada.
Residential real estate focuses
on the personal use of real property. It revolves around the wants and needs of
a homeowner, and their family. Property is purchased for individual use,
most often to provide housing for families. Property types can include, single-family
homes, town homes, and condominiums.
Commercial real estate
focuses on the business, or investment, use of real property. The main goal for
the end user is a return on investment, or any kind of business or industrial use
of the real estate to generate a return or income. Property types can include,
multi-family, apartment buildings over 5 units, office buildings, retail
shopping plazas or malls, or industrial and manufacturing property.
The most common type of
commercial investment is the multi-family or apartment building, where a single
investor, or group of investors, own and manage several residential units
inside one building, or complex, in order to generate cash flow and a return on
Here are some helpful tips
about how to buy commercial real estate in Canada.
- Sit down with a commercial
real estate professional, or coach, for direction and advice in the market
place based on your personal investment goals.
The best experience and education you can get is the everyday experience and
knowledge that comes from owning and operating commercial real estate. Outside
of actually operating the property, the next best thing is to watch and learn
from an experienced professional. Contact a professional in your market area
and offer to take him/her out for lunch. You’ll be surprised how willing most
professionals are to share their knowledge about how to buy commercial real
estate in Canada (or more specifically the area you’re looking to invest in).
By far the most important move you can make will be carving out a long-term,
and mutually beneficial, relationship with a Real Estate Investment Advisor
(REIA), who has the experience and vision to build a profitable real estate
portfolio that aligns with your personal and investment goals. As a qualified advisor,
the REIA will handle everything from direct coaching, personalized investment
strategies, and master planning of your portfolio. Your REIA will hunt down and
negotiate lucrative real estate deals, and continue coaching the investor in
applying affective property management techniques after the property closes.
The REIA will also carry a powerful network of supplemental advisors to
compliment the investment real estate transaction. The very first recommendation will likely be
a mortgage broker, especially with a commercial transaction.
- Assess your personal
resources. How much cash do I have? Where is it coming from? Are you working
with any partners?
Financing is super important. Commercial lenders care much more about the
property than you. Commercial lenders look for the property to be financially
self-sustaining and to produce enough monthly profits to service debt and be
sure there is enough cash left over for repairs and unforeseen expenses. All they
want to see from you is good credit, enough cash for a down payment, and some
additional net worth (approx. 25% of loan amount) to be sure you can back up
- Decide on an investment
strategy by finding the right property that will help you achieve your
- Who will be managing the
property? You, or a professional property manager?
This is a key decision you’ll have to make. You’ll have to weigh out the amount
of work it takes to manage the property, verses the cost for a property
manager. It largely depends on the property, and what works best for you. This
decision could largely impact the type of property that will work best for you.
- Patience is key in the
market place. It can take 3-6 months, or more, to find a good commercial
property that makes sense.
There are many factors that will make some properties a poor fit for your
commercial investment. Remember this is a game of numbers. Never attach
yourself emotionally to the property. After analyzing all data, if the ROI you
are looking for is not present, it’s time to move on and continue your search.
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