# Investing in storefront properties.



## 2tire2work (Jul 20, 2013)

Commercial properties sounds way better than residential properties. 
Can anyone with experiences or knowledge with commercial properties give me some pros and cons?
Anything from stories will help as I don't know anyone in that sector. 
Thanks in advance


----------



## MoreMiles (Apr 20, 2011)

2tire2work said:


> Commercial properties sounds way better than residential properties.
> Can anyone with experiences or knowledge with commercial properties give me some pros and cons?
> Anything from stories will help as I don't know anyone in that sector.
> Thanks in advance


pro: Rents are usually net, so your tenant pays for tax, maintenance, and insurance (TMI). Bad commercial tenants simply go bankrupt and disappear from your property. Bad residential tenants stay as deadbeat, occupying your space without paying.

con: Commercial units are measured in gross SF, and the "gross up" factor can be very deceiving. You may buy a 2000 sf unit, only to have 1500 sf actual usage. You have to share SF in parking lot and main lobby, etc. Commercial mortgage is difficult to obtain. Commercial properties are not bought by speculative investors so the likelihood of sudden appreciation is smaller.

Look at Hullmark in North York. It has both commercial and residential units. The residential units sold out 3 years ago. The assignments from flippers now sell at maybe 10-20% more. The commercial units are still on sale by the developer, with the same price as 3 years ago.
http://www3.tridel.com/hullmark-corporate-centre/


----------



## Mall Guy (Sep 14, 2011)

Really . . . how did you go from buying a single storefronts on whatever street, to Hullmark commercial condo's ? Apples to oranges !


----------



## MoreMiles (Apr 20, 2011)

Mall Guy said:


> Really . . . how did you go from buying a single storefronts on whatever street, to Hullmark commercial condo's ? Apples to oranges !


Do you think your post is very helpful to the OP? And no thanks, we are not discussing fruits here so if you are a fruit vendor yelling out your produces, you are in the wrong thread!

Also, are you from Toronto? Whatever street? Yonge Street... the most famous street in Canada. I consider a Yonge-street business address as the benchmark for business properties.

Ground or above ground units share similar principles... you just have to pick the ground floor. Unless you are talking about freestanding buildings... those ones cost about $5 million and up in prime area of Toronto. I would assume if the OP has $5 million to buy commercial properties... he or she would not be asking for advice here.

So commercial condos are most likely the more suitable way for common investors to consider.

To the OP, you may consider www.icx.ca to find your target. Be careful there are lots of failed businesses listed for suckers to take over. You need to read those listings very carefully.


----------



## Mall Guy (Sep 14, 2011)

I don't have the energy or need to dispute, or rebuff your post. Not everyone lives in Toronto, but I am well aware of that development's location (including it's past life a Miracle Food Mart anchored plaza from the 50/60s). I have also had the very brief pleasure of meeting Mr Murphy Hull, namesake of the development. My point was you went from storefront to commercial condo and said "you just have to pick the ground floor" which was never available in that development (cause Mr Hull and Mr DelZotto are really smart guys) . . . damn I'm debating again and didn't mean too!

But why limit a freestanding building to the GTA ? And if it is a quality property, and the OP has good credit, he can still likely get a 70% LTV, but he will just need to sign a personal guaranty, same as buying a residential rental unit. 

That said, your best advise was to point 2T2W in the direction of www.icx.ca . . . as I am sure he is just looking a a store front (maybe with an apartment above) opportunity. There are many of these in many markets areas. 2T2W needs to invest where he thinks the *next* Kingsway, Port Credit, Downtown Oakville, Danforth, Aurora, Barrie, etc will start to develop . . . and he needs to know it's not easier, just different challenges.


----------



## Berubeland (Sep 6, 2009)

Commercial properties are different. First when you buy its harder to get a mortgage and it's not insured by CMHC and so interest rates are higher. Next when it becomes vacant it can be vacant for much longer but if your tenant is successful, they will stay for many many years. Third, you as the landlord are protected from increases in property tax, insurance or maintenance by the lease but confined by the tenants ability to pay. So while it's easy to pass cost on, tenants will have to be able to pay for it. 

For example at one plaza I manage I have a parking problem, so tenants are always complaining I should tow. So I ask them how much are you willing to pay for me to tow cars out of here? Because every car I tow will cost you about $35. Then they lose their gusto for towing people's cars.


----------



## marina628 (Dec 14, 2010)

One advantage of commercial real estate is the tenants stay for decades.My husband is HVAC Business owner and they just sold their unit in Toronto that they bought about 20 years ago and relocated the business to Pickering because of the lower taxes and their new building is double the size for only $300,000 price difference.It is a family business so I guess we will stay there another 20+ Years.My friend has experience with buying units in strip malls and his tenants even had to build the interior walls and install their own A/C units at their expenses.Downside is you may need as much as 50% as downpayment .One of my investment accounts I have invested $50,000 over last 5 years and current value is $60,000 ,if I took that $50,000 and bought real estate back then I would be seeing $500 a month net from same money not including real estate appreciation.If you have the guts for it there are many commercial opportunities in Newfoundland ,some areas on the highway that would make you very rich if you had a gas station ,coffee shop.But I was shocked to see how many strip malls are being built in Gander area.Just one example but you can find these pockets of opportunities right across Canada .


----------



## james4beach (Nov 15, 2012)

marina628 said:


> One advantage of commercial real estate is the tenants stay for decades.


Not if you're talking about that Yonge street example. I lived just off Yonge for years and there is huge turnover, I see businesses come and go every 2 months. But maybe it's just an illusion because Yonge is so heavily packed... perhaps it's still a relatively low % turnover


----------



## 2tire2work (Jul 20, 2013)

Thanks for all the info. I am leasing at the moment. 
I am selling my business and looking for an investment to generate retirement income. 
I don't know much about the landlord side. But I guess I have been fortunate that I never missed a rent payment. But the small pizza shop had changed many owners over the years. 
With lease rate at $30 a sf. A 8000 sf free standing storefront looks very profitable. Tenants pays for taxes and all maintenance cost. The only expenses is the cut to the real estate agent.
It is in a nice upscale suburb with low crime rates. And parking is not a problem. 
Worst case I can start a business again at that location and delay retirement. 
Am I missing any expenses or concerns?


----------



## 2tire2work (Jul 20, 2013)

I apologize for not being more specific and caused all the confusion.


----------

