The commercial real estate sector continues to boom in Canada, and Toronto’s real estate market seems unlikely to slow down any time soon.
As a result, many more people are looking to commercial real estate for its potential for lucrative investment opportunities.
But investing in commercial real estate isn’t easy. It requires a lot of research and an abundance of patience to make sure that the investment is a good one. Without the requisite preparation, a commercial real estate investor can end up with a great deal of risk.
Yet the right investment in this industry can definitely yield incredible results for the savvy investor. If you’ve begun exploring the possibilities of this sector, here’s a few things that you should keep in mind.
Research Your Marketplace
Successful entrepreneurs and investors know that lucrative investments are well-researched investments. The real estate industry in Canada requires knowledge of its legal complexities, which vary across provinces and territories.
These details could include the area’s tax rates, land availability and environmental issues. Paying attention to interest rates — both historic and future — is key to making smart decisions. When the Bank of Canada raised interest rates in 2017, that had a huge impact on loan rates and borrowing.
Given that the Bank of Canada just raised interest rates in April 2022 — and is likely to do so again as early as this year — researching the likely trajectory of these rates is a good place to start your work.
Get Some Help
For those who want to lease or buy a commercial property, it’s not a bad idea to find someone who can help you navigate the landscape.
An experienced real estate professional will not only have resources and tools to help you, but can also teach you how to find crucial information all by yourself. Try to find someone who will be available to answer your questions, and take advantage of this opportunity to level up your knowledge and skills.
Crunch Some Numbers
Even if you’re not aiming for something ambitious, the Canadian real estate market is competitive and fast. There’s no time for figuring out your finances once a deal is on the table. When a property becomes available, especially in the country’s most popular markets, you want to already know what you can afford, how much cash you can offer, etc.
You should have a financing strategy in place before you start talking to the property owner about buying.
Will you need a loan? What kind of loan? Do you already have a bank or financial institution ready to help with that loan?
You will want to have a recent credit report, and also be aware of what interest rate you can afford. This is important not only for the timing and fast pace of buying and selling Canadian real estate, but also so that you know how much you can spend and still have a lucrative deal.
Start With What You Know
In real estate, location always matters.
That’s why it’s helpful for first-time real estate investors to buy a property that they can visit as often as possible — preferably every day. If you can find something along your commute to work, for example, it will be easier to conveniently check on the property, which can save money by reducing the need for a full-time property manager.
It also ensures that you stay updated about developments occurring in the area of your building and the needs of your tenants. This will make you a more agile and capable property manager who knows how to make changes that keep the property profitable.
Commercial real estate will continue to be a smart and lucrative investment in Canada — as long as you do the work and stay on top of developments in your property and marketplace.