Owning a commercial property? | GTAMotorcycle.com

Owning a commercial property?

R

rashidme

Well-known member
Does anyone here own a commercial property? if yes then:
1. is it better then a residential one?
2. is the down payment usually more than a residential?
3. is it easy to rent it out?
4. what about repairs etc, or is it the tenant that does the repairs?

I am thinking of investing money into commercial property as residential property has too many headaches associated with it and an owner has very little power if the tenant refuses to pay etc...

Any thoughts?
 
rashidme said:
Does anyone here own a commercial property? if yes then:
1. is it better then a residential one?
2. is the down payment usually more than a residential?
3. is it easy to rent it out?
4. what about repairs etc, or is it the tenant that does the repairs?

I am thinking of investing money into commercial property as residential property has too many headaches associated with it and an owner has very little power if the tenant refuses to pay etc...

Any thoughts?
Click to expand...

I've been thinking about the same thing. Here is what I've come across. Location is key. There is too much crap out there. Your tenants are mostly small businesses that are incorporated. If they aren't successful they will file for bankruptcy. You usually get more rent from commercial tenants and there is also TMI (taxes maintenance and insurance) that you bill them for. Basically they pay for the maintenance and upkeep related to their unit.

I've heard of some units sitting there for months without a tenant so make sure you can make the loan payments even if you don't have a tenant. Location is critical, but for good locations you are paying a crap ton of money.

Have you looked at www.icx.ca and seen commercial property values? Usually 1-2 million easily. Do you have 20% to put down?
 
Good luck getting a 'mortgage' on a comm property. Near impossible.

And comm taxes are waaaay higher than houses.

Hope you have deep pockets.....

Sent from my Passport
 
Um, if you think resi is a headache, you need to run in the opposite direction when it comes to commercial. It's far more complicated to find, to buy, and to maintain. And finding tenants is far harder than finding renters for a house. The fact that you're here, asking those 4 questions, means it's not at all for you.
 
rashidme said:
I am thinking of investing money into commercial property as residential property has too many headaches associated with it and an owner has very little power if the tenant refuses to pay etc...
Click to expand...


Princess's Man say: if you don't want the headaches, but still want to invest in real estate, have you considered REITs?

Princess's Man is also considering getting into commercial property. Princess's Man's understanding is this:

  • getting financing is more difficult than residential with higher down payments (as LINK666 has mentioned); commercial properties are riskier for banks
  • finding tenants takes longer than residential. However, tenants usually stay longer.

Other thoughts:
  • do you really want to tie up millions of dollars into one investment? Princess's Man doesn't know what your investment portfolio looks like. But, if your commercial property represents a good chunk of your portfolio, than be cautious. Princess's Man would speak to your accountant first to see if it makes financial sense.
  • Are you planning on making money from your tenants? Or, are you more of a speculator (i.e., hoping that your property value increases in the future so you're able to make a profit in the future)?

Good luck!
 
SunnY S said:
Good luck getting a 'mortgage' on a comm property. Near impossible.

And comm taxes are waaaay higher than houses.

Hope you have deep pockets.....

Sent from my Passport
Click to expand...

What you mean 5% down won't work? And there's no cmhc to back you up?
This isn't what the canadian people have been used to.

Invest in a couple houses, they'll keep doubling in price every 5 years and you'll be a millionaire in no time.
 
I owned an apartment building for a number of years. Nothing but headaches. Banks are a nightmare, they can change and add clauses at will, governments are horrible to deal with. As codes change you get nailed. Taxes are outrageous. The list goes on and on.
Save money and headaches..but lottery tickets.
 
Agreed with everyone on the comments above.

Only reason you should consider it is if you have shops or brick and mortar stores where owning the property can be cheaper than renting. That's why I want to buy them. I'm tired of paying $182000 in rent every year.
 
Pluses:
If the tenants don't pay, you change the locks and get new tenants (no BS landlord tenant act and people crying about being homeless)
Long-term tenants
Sometimes more durable construction (even if the tenants create a grow-op, you lose all interior finishing but the concrete shell is fine).

Minuses:
Financing is hard to come by. Expect downpayment of at least 40%, sometimes more.
Big dollar game (relatively), probably looking at $800,000 to start in the GTA. I would want at least 60% as cash for downpayment and covering the loan/tax until the right tenant was found.
 
GreyGhost said:
Big dollar game (relatively), probably looking at $800,000 to start in the GTA.
Click to expand...
More affordable than a house according to our other thread. lol
 
unL33T said:
More affordable than a house according to our other thread. lol
Click to expand...

If people want to play Fischer-Price 'My First Landlord', one thing that seems to work is location near a university/college, that isn't as commuter. Think St.Catharines, Guelph, London, Kingston, etc. Grab a house, 4 rooms, 4 students. Keep it in decent liveable condition, and you have regular cash flow. Once you get the cash flow, then go from there.

I personally know 3 people that have done this, 2 have succeeded and 1 failed. It was as much to do with their personalities as it was their efforts.

It is not easy, it's not the picnic your mother in law is telling you about and being a small time landlord sucks more often than it is counting money in your backyard jacuzzi. You have been warned.
 
rashidme said:
Does anyone here own a commercial property? if yes then:
1. is it better then a residential one?
2. is the down payment usually more than a residential?
3. is it easy to rent it out?
4. what about repairs etc, or is it the tenant that does the repairs?

I am thinking of investing money into commercial property as residential property has too many headaches associated with it and an owner has very little power if the tenant refuses to pay etc...

Any thoughts?
Click to expand...

Your question is a bit vague but implies owning to rent. Owning your own business property is IMO very wise if you can afford it.

Own to rent has advantages over residential.

No landlord tenant act, straight hardball.

Disadvantages

No right to vote in elections therefore treated like crap by the politicians

Value plunges during recessions. No work so no need for property (Still need a place to live)

Tenant can destroy the building and you end up chasing a numbered company.

High taxes for next to nothing, even if building is vacant.

I sold my industrial condo instead of renting it out.
 
There is also an option around the commercial mortgage where you can remortgage your residential property and use the $ to buy the commercial. But I believe you can write off the interest on a commercial mortgage.
Was looking at a property in T.O. last year, $600k 4 residential units, 2 commercial. So all the benefits. And headaches.

Sent from my Nokia Lumia 625 Windows Phone using Tapatalk
 
its not that hard to raise money if you find the right building, lots that cant (or don't want to) buy it outright can partner up on a property. Where you buy will dictate who you can rent to, zoning can affect the tenants choice.
Do not rent to restraunts without a huge deposit, they go under in the middle of the night 50% of the time.
There is a LOT of people in this business so if you find a cheap building there is a reason. And do an environmental survey if it was ever anything other than a barbershop. You can buy a toxic waste site that looks great.
If it currently occupied look at the leases carefully, and have a real estate lawyer look at it, then have your accountant look at it.
 
crankcall said:
its not that hard to raise money if you find the right building, lots that cant (or don't want to) buy it outright can partner up on a property. Where you buy will dictate who you can rent to, zoning can affect the tenants choice.
Do not rent to restraunts without a huge deposit, they go under in the middle of the night 50% of the time.
There is a LOT of people in this business so if you find a cheap building there is a reason. And do an environmental survey if it was ever anything other than a barbershop. You can buy a toxic waste site that looks great.
If it currently occupied look at the leases carefully, and have a real estate lawyer look at it, then have your accountant look at it.
Click to expand...

I would recommend renting to restaurants that are franchised and make sure to write on the agreement that the franchisor is the guarantor.
 
We've had a residential 6 plex in our family for over 5 years. At the time we purchased it was still classified as a residential. Now with the gov't changes that came about approximately 2 years ago anything over 3-plex is commercial...before it was 7-units and above. Which is too bad because I REALLY wanted to buy another one :(

Current rules require a minimum of approximately 30% down, with higher property taxes, gas bill, hydro bill and all that fun stuff. I can't even re-mortgage any more but can only renew due to the new rules. If they change it and I can't renew at residential...time to sell.

As for headaches, yes of course there are headaches...always are. Depends on how much you put into it. I know landlords that are 'set it and forget it' mentality and their properties go to the dump very quick. Others take care of their properties, and deal with their tenants appropriately and have great success running the business.

Problem now is a 3-plex is selling for 700k+ and that just does not allow you to make your money back on a regular basis. So unless you have a nice chunk of down payment...good luck.

As for commercial with storefront and unit above, I'd say those are best. You can rent the lower floor, and the top floor. Know a few people doing that and they enjoy it as well.

Lot of people are in this game, and you'll need either luck, or a ton of $ to get into it within the city limits here. Cheap properties are easy to come by, but there are reasons that they're cheap...same as houses.
 
LiNK666 said:
I would recommend renting to restaurants that are franchised and make sure to write on the agreement that the franchisor is the guarantor.
Click to expand...

Franchisors are safer since parent company may take back a location to avoid "embarrassment" to the brand, but many time lots of luck. Also may be a hard negotiation to get the parent to sign a quarantee unless its a stable major. The parent company dissolving happens to. My drinking buddy is a leaser for a major GTA property , think Getardo , Matamy or Kaneff in size. They have lists of who they want or don't. Medical and dentists are golden.
 
You must log in or register to reply here.

Back
Top Bottom