What You Need to Know When Looking for Commercial Real Estate in the GTA
The market for commercial real estate in Toronto has been booming for a while now. This boom has led to high prices, high demand, and it’s brought in many new investors looking to make it big. Commercial real estate is incredibly lucrative, but it isn’t easy money. Real estate is complex, and there are many things you should know before jumping in.
It’s not uncommon for people looking at commercial property sales in Toronto to come from a residential real estate background. But there’s something you should know. Commercial real estate is a different game entirely.
Breaking into commercial real estate is an excellent opportunity to bolster your portfolio with substantial assets. Commercial spaces can generate impressive cash flows, offer attractive cap rates, and can even offset your costs if you run your own business.
Here are a few tips you’ll want to know before purchasing commercial real estate in the GTA.
1. Set Your Goals Early
A commercial property is a significant investment. Start by establishing your goals and what you want to get out of this investment.
Ask yourself questions like:
- What type of building do you want?
- Do you plan to renovate the building?
- Are you looking to invest for the short or long-term?
- What area of the city do you want to invest in?
Commercial real estate has endless possibilities. You can modify commercial buildings to serve many purposes. For example, a building may include retail on the ground level and offices on the upper levels. Whatever you decide, set your goals early, so you have a plan.
2. Patience Is Key
Patience is something that every commercial real estate investor needs to have. Compared to residential real estate investments, it takes time to handle commercial real estate in Toronto.
The sales cycles in this field are much longer, and impatience can lead to bad deals and you overpaying for a property.
Before purchasing a property, you need to do your due diligence. You should think about:
- How the property compares to other similar properties in the area.
- Whether there are any liens against the property.
- Why the current owner is selling it.
- If you will inherit any tenants with the purchase.
- What are the current market trends?
- How much the property taxes, repair costs, and maintenance is.
- What kind of significant repairs have been done to the building?
New properties are listed almost daily. Be patient and look for a property that fits your needs.
3. Identifying the Right Commercial Real Estate Investment for You
The options for commercial real estate for sale in the GTA can be overwhelming. The GTA is a large area, and there are many properties for sale. Take the time to find an agent that can help you identify properties that fit your investment strategies.
Determine your risk level, what kind of ROI you expect, and what you want to do with your commercial property. Here are a few things we believe you should consider when looking at your next investment:
- Zoning – What kind of area are you investing in? Think about the demographics, property taxes, and if your property is zoned correctly. Commercial buildings require zoning, and you may find it challenging to get certain zoning approvals.
- Tax Laws – What are the property taxes in the area you’re considering? You will have to pay your property taxes on a cycle (quarterly or annually) and federal and provincial taxes based on any income you generate from the building.
- Competition – Competition exists anywhere you go. Depending on your investment strategy, competition can be beneficial or detrimental to your goals. Determine if a specific area is competitive when looking at commercial property sales in Toronto.
- Ownership Responsibilities – In Canada, property owners have specific responsibilities, rights, and requirements. Familiarize yourself with the various laws that govern landlords and tenants.
- Avoid Failing Businesses – Does a property you’re looking at have an existing business? Find out if that business is stable and whether you can rely on that tenant to pay their rent. Failing businesses can be at risk for violating their lease, leaving you high and dry.
All of these factors will influence the type of deals you seek, what areas you pursue a property in, and how you structure your final deal.
4. Finding the Right Listings
Competition is fierce for commercial property sales in Toronto and the GTA. There are many investments available, but finding the right one is challenging.
Unless your a licensed professional, you’ll need to find a reputable agent to work with. Start by looking at listings in an area that you like. See what’s available, what the average price per square foot is, and whether demand is high.
Share a few optimal listings with your agent to give them an idea of what properties interest you.
You can also approach real estate agents and clubs directly to see what properties are available for purchase.
5. Know Your Numbers
Real estate transactions are significant. We recommend that you do your due diligence if you are using leverage to purchase a new property.
Take some time to analyze things like:
- Interests rates and how rising rates will impact your investment?
- Capitalization rates and what kind of annual return you can expect from your property ?
- Vacancy rates and whether you will have trouble finding tenants ?
- How much you will spend on property taxes?
Things like rising interest rates can drastically change your monthly payments. That’s why it’s vital that you understand how to maximize the earning potential of your property.
Looking for Commercial Real Estate in Toronto? CHI Real Estate Is Here
Commercial property sales in Toronto are an excellent investment if you know what to look for. You can trust the CHI Real Estate team to guide you through the commercial real estate process.
We love helping our clients find the perfect properties for their portfolios. Ready to get started? Please get in touch with a member of our team today.