If you have decided to start investing in commercial real estate in Ontario, you may figured out, there are many factors to consider when purchasing commercial property. If this is the first commercial investment you are purchasing, you will need to know what to look for before starting your search. In this page, we will cover everything you should know when trying to find your ideal investment property.
Before you start looking for a property, you must decide which type of commercial real estate you want to purchase. Do you want an industrial property or a shopping center? Do you want a multi-family housing property or do you want a distribution center? Identify which type of commercial real estate you want before looking at other attributes in a property. Once you make your decision, look for the qualities below.
One of the most important factors for commercial real estate is location. I always ask my clients which area they would like their property to be in, and give them recommendations for great areas. Depending on the type of property you want to purchase, you will need to look at different locations. For example, a retail space should have easy access to major roads or highways, as it will be easy for customers to get to. An industrial site will usually do best in industrial areas with a lot of land. Be sure to ask your commercial real estate broker about the best areas for commercial real estate in Ontario.
The size of a commercial real estate property is oftentimes overlooked and pushed to the side. Truthfully, the size of your property is very important, as it will be one of the things your tenants at when deciding to lease your space. Your property should be large enough to fit most businesses’ needs. If you want to purchase a shopping center, the space will need to be large enough for your tenants’ merchandise, employees, customers and more. Investing in an app space.
On the other hand, you also don’t want your space to be too large for tenants to afford. For the most part, the larger your commercial property is, the more expensive it will be. This is why you will want to try to find a happy medium. Try to find a property that is the average price and the average size for the neighborhood you want to be in. It is also a great idea to do some research to find out the average size each industry needs in their rental space. Your real estate broker should give you this information and other pieces of advice as well. The more you know about the needs of your future tenants, the more likely you will always have someone renting your space.
When we are helping our clients find their dream property, we always remind them to consider the appearance of each listing. At first, this factor may seem unimportant and can slip your mind, but it is something to watch out for. Properties that are too bold, outdated, and eccentric can have more difficulty finding tenants than others. Clearly, this is something you want to prevent. Most tenants will be looking for a property that matches their business’ style and that will appeal to their customers. This is why it is always the safest choice to find a property that is neutral in style, recently updated, and stylish.
Another thing to remember about tenants is that they will usually request to make some changes to their space. This could be something as simple as painting the walls a new color, to knocking down a wall for a more open layout. While you should stay within your boundaries, it is best to give tenants some freedom with their space. Your tenants will want their space to match their business, so try to be flexible with them.
The price tag of your commercial real estate property will not be the only cost you have to budget for. When you understand the other costs associated with your purchase, it will be much easier to make it back from your tenants. Be sure to budget and expect the following costs when purchasing your property.
While we are on the subject of appearance, let’s talk about the renovations you may need to do on your property. As mentioned, you should have a slightly modern commercial property that is not outdated in the slightest. Sometimes, the best deals are on properties that need renovations to keep it looking nice. You may have to change out fixtures, flooring, wallpaper, or anything else that affects the appearance of your property. Stay ahead of the game and try to get a quote from a contractor as soon as possible.
Similarly with residential real estate, as the property owner, you will be responsible for repairing damage to your property. Repairs like new roofing, plumbing, and air conditioning units will need to be budgeted for so they do not take a hit to your bank account. Be sure to look at the average cost of these repairs for your type of property so you know how much to budget for.
Just like with your home, utilities are an added cost to your monthly bills. We usually recommend to our clients that they charge their tenants for their utilities because they can be very expensive. You can easily charge each tenant for their water, electricity, and gas bill each month so you are not left paying for it. This can potentially save you hundreds, if not thousands of dollars each month.
Another thing to consider is if you have any common areas in your property. If you have any hallway bathrooms or break rooms that are accessible to all tenants, you will need to account for the utilities used in those common areas. Many property owners prefer to divide these charges between all tenants. Another option is to tack on a few extra dollars to the rent charge as a common area maintenance fee (CAM) fee.
We hope the items explained on this page helped you understand what to remember when purchasing commercial real estate in Ontario. If you are ready to take the next step for your search, it is best to hire an experienced broker who understands the Ontario area. A broker will help you see your options and find great properties.
We can help you find the property of your dreams in Ontario and the areas surrounding it. Our brokers will remind you to look for the above attributes while you are searching, so you make the best decision possible. Please contact us so we can start working together to find a great property.