Toronto Commercial Real Estate
But how do you evaluate the best properties? And what separates the great opportunities.
Like most real estate properties, success starts with a good blueprint. Here’s one to help you evaluate a good commercial property deal.
Learn What the Smart Insiders Know
To be a player in commercial real estate, learn to think like a professional. For example, know that commercial property is valued differently than residential property. Income on commercial real estate is directly related to its usable square footage. That’s not the case with individual homes. You’ll also see a bigger cash flow with commercial property. The math is simple: you’ll earn more income on multifamily dwellings, for instance, than on a single-family home. Know also that commercial property leases are longer than on single-family residences. That paves the way for greater cash flow. Lastly, if you’re in a tighter credit environment, make sure to come knocking with cash in hand. Commercial property lenders like to see at least 30% down before at minimum they’ll give a loan the green light.
Plan of Action
Setting the course is a top priority in a commercial real estate deal. For example, ask yourself how much can you afford to pay and then shop around for mortgages to get a sense of how much you will pay over the life of the mortgage. Using tools like mortgage calculators can help you develop good estimates of the total cost of your home.
Other key questions to ask yourself include: How much do you expect to make on the deal? Who are the key players? How many tenants are already on board and paying rent? How much rental space do you need to fill?
Understand and Recognize a Good Deal
The top real estate pros know a good deal when they see one. What’s their secret? First, they have an exit strategy – the best deals are the ones where you know you can walk away from. It helps to have a sharp, landowner’s eye – always be looking for damage that requires repairs, know how to assess risk and make sure to break out the calculator to ensure that the property meets your financial goals.
Drafted by Allen Mayer, Real Estate Broker