Tips And Advice for Buying A Commercial Property
posted in Mortgage News
Getting the right property at the right price is crucial if you’re planning to buy a commercial building in Canada, and the first part of the process is to understand the different types of commercial properties available to you. Some of the most common are as follows:
- Office space
- Retail space
- Multifamily units
- Factories and warehouses
Each one coming with its own set of advantages and disadvantages, you must try to choose a property that meets all of your requirements, and is in a good, strategic location for you. With cities like Toronto and Vancouver continuing to prove popular for businesses, demand for office space and retail outlets remains high. Property pros recommend that investors buy a commercial property that they can easily visit should they need to, or if buying a property in another location, that you invest in an agent to take care of it in your absence.
Think carefully about your budget
When determining how much money you have available to spend on a commercial property, you need to think carefully about both the initial down payment and closing costs, plus any other potential costs such as for upgrades or repairs. Also, consider how much it will cost to market any vacancies associated with managing the property.
Thoroughly research average building costs in the area and the potential for urban renewal to help determine your budget. Most commercial property investors make their decisions based upon the following strategies and goals:
- Land Banking: the hope that land will appreciate in value
- Development: building on the land purchased
- Fix and Flip: renovating the building and selling it on at a profit
- Owner-Occupied: using the commercial space to run your business from
- BRRRR: buy, rehabilitate, rent, refinance, repeat!
Begin searching the market
Once you’re clear on your available budget and what type of asset you want, you can begin scouring the market for properties within your price range that meet all of your needs. Search online yourself, or have an agent carry out the research for you.
Thoroughly assess the property
Once you’ve found a property that you want to make an offer on, be sure to check zoning and title documentation, and review any leases and surveys that might apply to it. Give the entire property a good inspection and check the condition of every aspect of it to make sure it’s suitable for what you’re paying, and what you plan to use it for. A professional inspector is best placed to help you with this, and your local mortgage broker can connect you with a reputable one.
How will you finance the property?
You’ll need to generate income from your commercial property, and if it’s owner-occupied, you’ll need to prove how you currently generate income through your business, or how you intend to generate income through the new business that you plan to run from the property.
Working with a local mortgage broker who’s familiar with the types of properties in your region, and the market in your area, is the most efficient and safest way to find a commercial property that meets all your needs, and comes in within budget.