Thursday, November 22, 2012

Rental Property Investing - Due Diligence on Yourself

Investing in rental properties can be a lucrative way to create wealth, by not only providing an income stream, but also by creating an opportunity for capital growth – AKA -- an increase in the property’s value during your period of ownership. Types of properties can include – residential (single unit & multi-family), retail/commercial buildings (single unit & strip centers), office buildings (single unit & multi-complex), mixed use (ground floor commercial & above ground residential), industrial buildings (single unit & multi tenant complexes), and even raw land that generates some level of income.

After assessing the various property categories, determine the type that best fits with your objectives and will best meet your criteria. It isn’t one size fits all in considering rental property investments and you need to do some necessary due diligence on yourself before moving forward – due diligence on the properties/market will follow later. Markets throughout Canada are littered with investment property ventures ‘gone bad’ and the best advice here is to ‘walk before you run’.

Some key questions to ask yourself:

Am I more interested in residential or commercial/industrial properties?
What locations/neighbourhoods are of interest?
Am I hands on, or will I require a property manager?
What are my cash flow/return on investment objectives?
What type of financing is required and what % downpayment can I put up?
What sort of financial implications can I expect due to vacancies?
What sort of maintenance & capital improvement costs am I willing to accept?
Will I incorporate?  How can I best limit any liability?
What sort of market am I comfortable buying in?
Is liquidity an issue if I need to sell (quickly)?

Any investment comes with its share of risk and rental (investment) properties are no different. Good preliminary planning, starts wth a honest self assessment of YOU, your objectives, capabilities, comfort zone and so on.  Once you’ve figured that out, it’s time to move on to the market in whatever direction best suits you.

Next up – will examine return on investment strategies and look at the mathematics of it all.  As always, seek out experienced commercial realtors within your market to assist with acquiring the best rental properties for you.

Wednesday, November 14, 2012

Commercial Building Sales/Acquistions - It's a Wrap!

Over the past 7-8 months, we’ve tried to overview in a ‘soup-to-nuts’ fashion the area of buying/selling commercial properties. Targeted more at the owner-occupant market, we’ve tried to provide some valuable input as you consider your purchase/sale objectives. If you are currently active on a specific deal, there may be a topic that applies directly to your situation and perhaps offers some valuable perspective on it.
Within our blog archive, topics are posted weekly and titled according to the subject – which should make for quick reference. If upon reviewing the assorted topics you cannot find the subject you require, feel free to contact us and we will be more than happy to respond. Again, keeping in mind that we operate out of the Windsor-Essex, Ontario area, and our perspective is somewhat based on our market. But if we cannot help, we will try to put you in touch with someone in your market who can.

Some final thoughts on commercial property sales, whether you are looking to Sell or
Buy, “Know your market” or better yet, make sure your broker does. Real estate has always been viewed as ‘local’ and the commercial property market is no different. It’s most important to have a clear picture of  the current state of your market – and specifically - price/ft. trends, market turnover, listing/sale ratios, availability of financing, and general inventory levels of like-properties. Again, market data may be harder to find and less readily available than with the residential market – but it’s out there and you need to be up on it.
Again, seek out experienced brokers with strong commercial property sales backgrounds to assist in your area – do not go it alone. To see our sales history, click here.

We are moving on – next week we begin a new series on RENTAL PROPERTY INVESTING with a full slate of weekly topics to keep things interesting.

Tuesday, November 6, 2012

Pricing to Sell...(Sellers Only)

Once the decision’s been made to put your commercial building on the market, the Million Dollar question that arises is – what sort of asking price do we set? In early blogs we’ve discussed valuation techniques, made suggestions relative to interviewing brokers, and even covered the topic of formal appraisals. All of this should have put you in a position of understanding the value of the property.  Now the moment of truth is here and its time to establish a price to market the property at.

Before you do set the price, some final questions worth considering:

Market Turnover – what sort of commercial property turnover rate is your area exhibiting?  How long has it taken to sell similar buildings in your market – on average 2 months, 6 months, 2 years...?

Commercial Financing – is it available through conventional means and at what sort of rates/terms?  Financing a commercial property is generally necessary, and we need to understand all of the options available.

Buyers Market vs. Sellers Market – what sort of market is your area experiencing?  In short, more sellers or buyers, price growth or decline, and general market activity/traffic?

Local Economy – is it expanding or contracting, is unemployment rate lower or higher (vs. national average), new housing starts up or down, and is there population growth? Call this Economics 101 – but you need to be in step with your economic (market) realities.

Competitive Positioning – do you have a competitive advantage relative to competing properties in the market?  Better location, superior building quality, discernable site advantages … giving you the ability to promote better value for your property?

Finally, ‘Serious Buyers’ tend to prefer ‘Serious Sellers’, and vice versa. Your asking price should reflect the fact that you are serious, and that you have priced your property accordingly. Give your asking price careful consideration, in order to put yourself in the best position to successfully sell your property.

As always, consult with experienced commercial brokers within your area in order to determine a ‘Pricing to Sell’ strategy.