Canada is currently enjoying a stable and strong economy with favourable growth projections for the future. The stability of the economy is the reason why the real estate market is witnessing a steady price increase and experiencing high demand for properties across cities. Amid this boom time, commercial real estate for sale is also stirring interests among buyers and finding more takers than ever before.
In fact, more investors are now exploring opportunities to buy commercial properties for long-term capital growth. The availability of a wide range of commercial properties, from modern office spaces to high-end retail shops to industrial warehouses, is fuelling the demand further. With desirable locations accompanied by strong tenant demand, the time feels right to invest in commercial property and make the most of the market conditions.
However, buying commercial property is a more complex investment than residential real estate and therefore involves more research and thorough due diligence. Investors looking to build wealth by buying commercial property must first understand the market and see through the pros and cons before making the purchase.
In this blog, we will explore the various pros and cons of buying commercial property in Canada and also share some useful tips for making your investment risk-free and profitable.
Let’s get started then…
The upside to investing in commercial real estate
- Steady income – Investing in commercial real estate can generate steady rental income and ensure a consistent cash flow for investors.
- Future growth potential – The real estate market in Canada has been experiencing a value appreciation in recent times and any investment in commercial property can ensure a future growth potential for investors.
- Diversification – Commercial real estate can prove a great opportunity to diversify the portfolio to those investors who are already invested in residential properties.
- Higher return on investment (ROI) – Investing in a commercial property results in less overhead for the investors, ensuring a higher return on investment. It’s the tenant who will have to bear the costs of most things, including maintenance, repairs, property taxes and insurance premiums.
The downside to investing in commercial real estate
- High upfront costs – Compared to residential properties, investors need a higher upfront capital to buy commercial real estate and this could be a roadblock to many.
- Cash flow risks – The real estate market can be volatile and might experience vacancies or non-payment of rent, resulting in risks to investors with the expected cash flow.
- Legal complexity – Investing in commercial real estate is fraught with way more legal complexities than residential properties. Investors need to abide by many laws and regulations and they may need professional help to make the investment viable.
Things to consider with commercial real estate investment
Research the location thoroughly – When it comes to buying commercial property, location is always a big factor. Investors should search for properties that are located in areas with solid economic foundations, such as low crime graphs, a growing population and high employment rates. It’s equally important to consider the area’s proximity to amenities like transportation, highways etc.
Analyze the risks with property type – In Canada, there is a wide range of commercial property types for investors to choose from. Each type of property will have its own unique kind of risks and rewards which an investor must analyze before making the investment. The right strategy is to involve real estate agents and seek help in understanding the nuances associated with each property type.
Know the financing options – Buying commercial property is a big-ticket investment decision that involves high upfront capital. To buy a property on that scale, investors often need loans with the best terms and best possible interest rates. They should shop around for the loan, compare the terms of different lenders and involve a commercial realtor to negotiate the deal.
Hire a property attorney to abide by the legal concerns – Investors who are looking to buy a commercial property for sale should be ready to face a lot of complexity and a number of legal considerations. There will be many steps and procedures with contracts and agreements to be signed to meet the legality of the purchase. All this could prove a big hassle if there is no professional help. Hiring an expert property attorney can help through the entire process and also ensure legal-proof investment.
Conduct due diligence – Commercial real estate is a big financial decision that involves lots of money, time and effort. Investors should therefore get a thorough due diligence done on the property before making any purchase. The key is to research the local property market, review the financial records related to the property and carry out property inspections.
Buying commercial property in Canada is always a smart investment decision for those investors who are ready to research the market and consider all aspects of the deal. With an experienced team of professionals for help, any investor can get value with commercial property investment and realize their goal of earning profit and enjoying a long-term growth potential.