Any input regarding commercial properties for someone with limited experience? Veterans or ppl with knowledge about Ontario please help.

[Anonymous]

Here is my sorry situation. Before joining REIN, I purchased properties which negatively cash flows four digits each month but they have appreciated beyond that. Regardless, this is weak foundation to start out with. I recognize this as an amateur`s mistake (I should have picked an avatar sporting a dunce cap instead) and I am ready to move forward nonetheless. Selling these properties is not an option due to other variables.

I am determined that the next property`s cash flow will equal or exceed the amount I am currently out of monthly, even if I have to put 60% down. I attended the Western Conference and I will be attending the Sept event in Toronto. Although I have not yet heard the top 10 towns, I assume Kitchner-Waterloo-Cambridge will remain on the top 10 towns.

I am thinking that I should strategically choose cash flow over appreciation at this point. I don`t mind the "delayed gratification" of having little cash flow now and greater appreciation in value later but from all that I`ve absorbed at REIN meetings, I ascertain that I should be choosing larger cash flow now even if it means less appreciation in value over time, especially in these market conditions. Ontario seems to offer more cash flow so I am heading in that direction.

I have X dollars to work with. I can purchase more than one residential property or a commercial property with multiple units. I hope having multiple units will provide me with "economy of scale."

I would very much appreciate input on:

1. My logic/investment strategy- Does it make sense or are there more factors to consider?
2. Factors in acquiring a commercial building that I may not have thought of or may find helpful. ex. The difference in provincal tenancy laws working for or against me, the ideal age of a building that I should look at, property management issues..
3. If you were in my position and had to choose, which city or cities are forward looking in terms of cash flow
4. Just any input, especially from REINsters who have been there and done that would be much appreciated.

p.s. Are residential agents allowed to deal with commercial buildings in Ontario?

 

[invst4profit]

Not a REINster however I will start by saying paying down a mortgage (large down payment) does not increase cash flow, it artificially forces cash flow. In addition it has a negative effect on ROI.
Definitely concentrate on positive cash flow. Appreciation does not pay the bills or put food on the table.
Much better to be an investor than a speculator at this point in time especially since your first purchase is weighted heavily to the speculative side already.
Also, contrary to REIN philosophy, at this time stay in your own back yard, management problems can be a nightmare from a long distance and Ontario LTB is a headache. Others opinions will no doubt differ.

 

[Anonymous]

Thank you very much for your honest opinion. I heard Ontario LTB is a headache too so I`m weighting my options to see if the upside outweighs the inconveniences. I don`t mind travelling at this point in my life. If I had unlimited funds, I would pick Alberta but I am afraid Alberta won`t cash flow as well as Ontario.

QUOTE (invst4profit @ Aug 27 2008, 02:45 PM) Not a REINster however I will start by saying paying down a mortgage (large down payment) does not increase cash flow, it artificially forces cash flow. In addition it has a negative effect on ROI.
Definitely concentrate on positive cash flow. Appreciation does not pay the bills or put food on the table.
Much better to be an investor than a speculator at this point in time especially since your first purchase is weighted heavily to the speculative side already.
Also, contrary to REIN philosophy, at this time stay in your own back yard, management problems can be a nightmare from a long distance and Ontario LTB is a headache. Others opinions will no doubt differ.

 

[invst4profit]

There are cash flow properties everywhere. Be more flexible with your criteria. Look at smaller towns around your area rather than just the top 10. It`s hard work but keep plugging away.

 

[Dan_Eisenhauer]

Hi Vancouver;

I believe that once a person has a license to sell real estate in every province in Canada they can sell any kind of real estate they want to. I see no reason why Ontario would be any different than BC or Atlantic Canada, the two areas of the country that I know for certain.

Having said that, as I have mentioned to you before, ICI (Industrial, Commercial and Investment) real estate is much more sophisticated that residential real estate. I can look at a listing cut and tell, with almost 100% accuracy, whether or not the listing agent has ICI training. As you are considering entering the ICI market, you should get to know agents in K-W, assuming that is the area that interests you, who deal with ICI properties on a regular basis.

Be sure you interview your potential agents to learn about their ICI experience. How many have they sold? What ICI course have they taken? What do they know about income and expense ratios (a dead give away)?

DO NOT pick a successful residential agent and assume they can serve your interests as you need to have them served. Realtors are supposed to be guided by a Standard of Conduct, and to refuse business that they do not know or understand. One of my rants is that most will not refuse to deal with ICI properties... probably because they see the big commission cheque coming their way.

Good luck! Remember my offer.

Dan