# Commercial real estate investing.



## Newby1983 (Apr 9, 2015)

Hi everyone. I'd like to hear from those with experience in commercial real estate the pros and cons of this type of investment.

Also some factors to consider when looking for a commercial property as an investment. Location onknow is important but anything else to consider? 

Thanks


----------



## Just a Guy (Mar 27, 2012)

The nice part is the triple net lease...the down side is, it can be vacant for years in a downturn. 

Financing is completely different, and more expensive. Also, depending on the province, there can be a whole lot more behind the purchase...environmental reports at the time of sale for example.

Do t confuse it with residential real estate (anything under 4 doors), as it's comepletely different


----------



## REInvestor (Mar 10, 2016)

Newby1983 said:


> Hi everyone. I'd like to hear from those with experience in commercial real estate the pros and cons of this type of investment.
> 
> Also some factors to consider when looking for a commercial property as an investment. Location onknow is important but anything else to consider?
> 
> Thanks


Commercial investing offers unique opportunities that residential does not. However, it does have some challenges as well. First the challenges, higher equity requirements to purchase and maintain. Unlike residential, with CMHC insurance to boost your leverage, commercial real estate generally requires 35% equity. In addition, tenants often require additional incentives to lease space and one such incentive is tenant allowances. This means there is an additional requirement for capital. Given the size of most commercial investments, if your property is not large enough to be it's own "market" you will need to do a fair bit of research on market conventions such as rent, terms, allowances, etc... In large commercial assets you likely have space that is homogeneous and you can use rental levels in one unit to help market the next. 

The benefits are that you are not subject to rent controls. You can move your rent up on lease expiration to current market levels. Additionally, you have longer term contractual rents. You have more flexibility in dealing with tenants in default. The buildings generally trade on cap rates that are available in the market which makes market knowledge must easier to uncover. 

Financing is generally the same for commercial versus residential. Where you find differences is in the size of the loans. Small loans are typically based on relationships where as larger loans are offered through commercial lending units who look to the asset first. 

Hope that answers your questions. If not, feel free to call me Adrian (416)571-4660


----------



## Infinity7 (Feb 21, 2016)

In commercial real estate you deal with professional sellers/buyers and tenants / you don't need to handle crasy people which residential RE is full of


----------



## tygrus (Mar 13, 2012)

Infinity7 said:


> In commercial real estate you deal with professional sellers/buyers and tenants / you don't need to handle crasy people which residential RE is full of


I've see lots of crazy people with a crazy business idea they havent fully looked into and they just rent some space and throw themselves into it and 6 months later out of business and the space sits empty.


----------



## Mukhang pera (Feb 26, 2016)

I'll second tygrus. I have seen some real commercial RE horrorshows. That does not mean it cannot be a good investment. It just takes work, knowledge. money.


----------



## Berubeland (Sep 6, 2009)

Commercial real estate requires a different skill set than residential. You do need a lot of patience to rent commercial space and you need a good business sense to be able to tell who is good and who is not. 

You need to use a lot more math, to figure out TMI for example. You have more budgeting to do, more paperwork. Your lease will be 100 pages. Default is simple just change the lock. But you won't just do that because you want the money. 

For me the most annoying thing is under capitalized buildings. I have one mall that needs a new parking. It's been priced 3 years in a row. It's a lot of work and again its not getting done because we don't have the money. The owners complain because they don't get their bonuses, but they starve the cow that gives the golden milk.


----------



## Newby1983 (Apr 9, 2015)

Thanks everyone. These are interesting points. This is something I've considered for a while and would like to execute in the next year. My goal is to acquire a small 1500 sqft office space to lease out as a starter to learn.


----------



## AlMansur (Jan 25, 2016)

Cash flow becomes much more important in commercial RE along with having a business plan.
The Comm RE Lease will have many terms, so it's important to check that, along with a lawyer and experienced Realtor to guide you.

No doubt, you will do your homework before you commence the business, Good luck!


----------



## AnnaDanishek (Apr 21, 2016)

There are a lot of factors you should take into account. Location, budget, acquisition and maintenance costs, tenants and lease agreements, expected revenue, possible risks, exit strategy and term of investment etc


----------



## Durise (May 16, 2016)

It's really good to invest in real estate sector. In commercial real estate, you need to deal with professional buyers and sellers and you can keep an agent with you. I think that will be smart investing.


----------

