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Whether it’s as an end user, tenant or investor, there are many profitable opportunities in Toronto if you know what to look for. There are also serious risks and challenges to manage. Toronto’s positive business environment, extraordinary livability, and stable and steady population and economic growth are driving the commercial real estate market and it’s not ready to slow down yet. This high growth doesn’t make it easy. Making a winning investment in Toronto takes skill and knowledge to succeed.
How do you find the right commercial properties?
It’s no secret that the real estate market in Toronto is huge. But finding the right property is challenging if you don’t know what to look for. Zoning, neighbourhood demographics, transit plans, future developments, and building condition all affect the price and potential use of a property.
If you’re looking for commercial real estate for sale, this guide is for you. These tips are designed to help you make the right steps towards finding the right property – whether you’re investing or using the property for your own operations.
1. Research, Research, Research
Remember how we mentioned there’s no shortage of commercial properties in Toronto. That also means there’s no shortage of bad investments too. Researching properties means looking not only at historical property prices, but also getting an understanding neighbourhood commercial lease rates, zoning by-laws, the views of neighbourhood and business improvement associations, as well as transit and development plans for the area.
Investing in commercial real estate for sale in Toronto will be a big financial decision, and it’s important that you’ve done your research to find an investment that suits your portfolio.
2. Arrange Your Financing
If you are like most buyers, you will likely want financing to complete the purchase of a property. When looking for a commercial mortgage, you can work with one of the major banks, the Business Development Bank of Canada (BDC), or private financiers. While all of these institutions are regulated, be aware of the risks associated with obtaining a loan from a private financier over one of the major banks.
3. Understand the Risks and Include Due Diligence Steps in Any Deal
Commercial real estate for sale in Toronto can be incredibly profitable. Real estate investments are big decisions – and you should approach them with rationality. Always consider your risks when evaluating a potential investment.
Buyers have fallen into many costly traps. For one investor, a previously successful storefront can become an unwanted vacant unit because a large condo development next door redirected foot traffic for months on end, and reduced property revenue by 50% for 2 years. Another investor bought an attractively priced building lot but a $500,000 environmental cleanup was required because an automotive service station used to be on the property and contaminated the soil, and eliminated all their profit from the sale of the developed lot.
Always include the appropriate due diligence clauses in your deals. This includes having your lawyer review deal documents environmental assessments, and researching zoning and use provisions in depth on the property before making your commitment to buy firm.
4. Know Your Ratios
If you’ve been around real estate before, you’ve probably heard terms like capitalization rate, loan to value, and debt service coverage ratio. All of these terms are important metrics that you can use to value a potential investment. As a basic starting point, your capitalization rate should always exceed your mortgage rates. Working with an investment advisor, accountant and real estate agent can help you define your benchmarks and meet your investment metrics.
5. Consult with experts
Include the cost of hiring experts to review a deal in the cost of acquisition. Architects, contractors, engineers, environmental consultants, lawyers, and of course real estate agents, play a key role in making your acquisition or lease go smoothly and lead to profitable outcomes.
If you are Looking for Commercial Real Estate for Sale? CHI Real Estate Can Help.
We work with investors of all types to help them find the right commercial real estate for sale in Toronto. We also help owners and developers find high quality tenants and secure premium, long term leases. Our team of experienced real estate agents knows Toronto and the GTA, and we specialize in commercial real estate sales and leasing, and have extensive knowledge of various property types, including:
We’re here to help. Please get in touch with our team for a no-obligation consultation.