Investing in Commercial Real Estate | clubmom

Want to stretch your investment thinking? Consider commercial real estate investing?

I love going to presentations where I feel I?m really learning from an expert who is capable of translating their expertise into a message that everyone can understand. And it?s a heady feeling when I succeed in arranging such a seminar. Recently, for my real estate investors group, I was delighted to host the wonderful Jennifer Borzym, AMP, of Equitable Trust Commercial Mortgages.

Our group ranged from people who?d never bought investment real estate before, to very experienced investors. Yet all of us took away nuggets of information that we will be able to use going to forward. Since it was such a great and informative session, I thought that would be worth passing on?

Why consider investing in Canadian commercial real estate?

Jen cited a 2012 study by Colliers International, the largest commercial real estate services company in the world. In their survey of global investor sentiment and opinions, they found:

• Canada is considered the second most attractive investment real estate market in the world
• 78% of investors planned to grow their portfolios in the upcoming 6 months
• People are looking for investments they can see and feel, AND which produce long-term income streams
• Canadian commercial real estate is considered very likely to produce an ongoing, reliable income stream, and a superior return on investment

How do you start?? Look at the ?asset classes??

If you?ve ever thought about commercial investing, what may have come to mind is large-scale shopping malls, office towers, or perhaps strip malls and the like.

Lenders and investors break down the types of properties into asset classes. Since this discussion is focused on newer investors, Jen suggested looking at the following:

• Multi-residential properties (that is, any house or building with more than 4-5 residential apartments in it)
• Mixed-use properties (for example, a townhouse that has a retail space on the main floor, with one or more residential apartments above it)
• Small retail plazas, or single units within a retail plaza
• Retail / office condo units on the main floor of office buildings

Jen suggested looking at the commercial listing search site, www.icx.ca.

Jen?s Tips for First-time Commercial Real Estate Investors

1. Make your purchase offer contingent upon inspections and appraisals.
2. Don?t be surprised by purchase costs ? these will include lender and broker fees of 1-3%, legal fees ($2000+), and third party reports such as property appraisal ($1500+) and possibly environmental reports ($1500-2000+) and/or property condition assessment report ($2000+).
3. Make sure that your expected cash flow from the property exceeds your total expenses. And make sure you don?t underestimate these ? they should include your mortgage payments, property taxes, insurance, maintenance, utilities, and repairs.
4. Have a list of trusted plumbers, electricians, handymen, etc. These will be worth their weight in gold if you have an emergency property issue to deal with.
5. Research what the market rents are for the property type and area that you?re interested in.
6. Get ample (translation: more than you think you?ll need) property insurance with plenty of liability insurance.
7. Buy properties in good locations that are attractive to potential tenants. You want to attract them AND hopefully, keep them.
8. Research landlord and tenant rights in the area you?re interested in. Make sure you know them inside and out.
9. Consider hiring a professional property manager.
10. Find what you like and go for it!

Photo: Michael & Christa Richert for stock.xchng

Source: http://clubmom.ca/investing-in-commercial-real-estate/

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