Commercial Real Estate: 5 Tips for Investments

By Samuel Thompson - 2016-09-06

Canada's real estate market has mostly attracted attention due to the skyrocketing values of residential properties. Whenever you read the newspapers or watch television news segments, all of the attention is concentrated on how detached homes in Toronto or Vancouver are worth around $800,000. It's quite rare to come across reports dissecting the commercial real estate market. But the commercial real estate market is soaring just as much as homes and condos.

Today, the commercial real estate industry continues to shatter decades-old records. And most experts contend that there are still plenty of gains to be made in this sector of the economy.

Does this mean that it is too late to begin investing in commercial real estate? Not by a long shot. In Toronto, there is a limited supply of commercial properties, and the demand is sky high. This means that there are plenty of opportunities to make a nice return on your investment.

Unsure where to begin? Here are five tips for investing in Canada's commercial real estate market:

Take Your Time When Starting Out

You have decided to start a brand new endeavour in commercial real estate investing. You want to dive head first into this arena before you lose any sort of momentum. Well, this is the wrong way to do this because you are then guaranteed to lose money since you don't have the acumen.

It is imperative to take your time when you're starting out. If you're really dedicated to investing in commercial properties then you need to perform the necessary research, the due diligence and the learning required to understand how everything works. It takes more than just putting $100,000 down and buying a few units. There is a lot more involved than that.

Simply put: take some time to start out and then proceed with caution.

Always Think in Big Terms

Although it is always good to be fiscally prudent and careful with your money, you should never refrain from thinking in big terms. Oftentimes, thinking big is easier and actually boosts your ROI.

For instance, you may be interested in acquiring a five-unit office building, which requires you to seek out commercial financing. This can be extremely difficult. Instead, you should invest in a 10-unit commercial property, which can be more affordable since they are cheaper per unit and requires the same amount of commercial financing.

Find Out What the Insiders Know

Do you want to be successful in commercial real estate? Well, think like an insider.

This means that you have to learn what the professionals and the insiders know about commercial property investment. They know the inside scoop, they know the formulas, they know the zoning laws like the back of their hand.

Also, as you look to borrow from your financial institution, you have to look, talk and act like an insider. Borrowing from the bank also requires that you have a minimum of 30 percent down. Although we're far from a tight credit market today, eventually you will need this sum.

Seek Out Excellent Financing Terms

Interest rates are at historic lows, and the Bank of Canada (BoC) isn't raising rates for a while. In other words, cheap money is here to stay for the foreseeable future. This means that lenders and banks have some of the financing terms and rates than ever before. It's a borrower's paradise. You have an entire marketplace to look for the lowest rates and cheapest fees possible.

Concentrate on One Investment at a Time

Do you want to be an investor or an accumulator of properties? Since you entered into this market to make some money, it's quite likely that you're the former. In investing, it's always one at a time. If you were successful in one investment then you can move on. However, if you're investing in five properties right away then you'll be overstretched and overleveraged.

Canada's real estate market is booming. This is applied to both the residential and commercial real estate markets. You just need the right direction, a lot of knowledge and a little bit of luck. As long as you are conservative, knowledgeable and ready for anything that comes your way then you will be successful in your endeavours. The Great White North has an array of investment opportunities, you just have to know how to locate them.

 

Back to Blog