Commercial Real Estate Investing in Canada

The Complete Reference for Real Estate Professionals

Pierre Boiron, Claude Boiron

• Publisher: Wiley
• Year: 2009
• Print ISBN: 9780470838402
• eBook ISBN: 9780470739068
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Many investors include commercial real estate in their portfolio, yet there are few comprehensive resources available to those looking for information on how to profit in commercial real estate. Written by a father-and-son team with extensive experience in buying, selling and developing commercial real estate, Commercial Real Estate Investing in Canada is a must-have guide for all real estate investors. This one-of-a-kind compendium will guide readers on such topics as:

• The business of real estate
• Land-use controls
• Taxation of property
• Types of income-producing properties
• Renovations and repairs
• Property management
• Property appraisals
• Conducting due diligence
• Real estate contracts

And much more! Commercial Real Estate Investing in Canada is a tremendously valuable and indispensable tool to all Canadian real estate investors, agents, brokers, property managers, landlords, loan officers, builders, and lawyers.

PART 1

Introduction to Commercial Real Estate Investing

Chapter 1: INTRODUCTION

1.1 Types of Real Estate Investors

1.2 Purpose of this Book

1.3 Is this Book for You?

1.4 Scope of this Book

1.5 Overcoming the Barriers to Success

Chapter 2: THE BUSINESS OF COMMERCIAL REAL ESTATE

2.1 Sorting Out the Terms

2.2 Commercial Real Estate Defined

2.3 Benefits of Investing in Commercial Real Estate

2.4 Evaluating the Market Outlook

2.5 Building Wealth through Real Estate Investing

Chapter 3: THE SUCCESSFUL INVESTOR

3.1 Understanding Risk

3.2 Developing Your Investment Plan

3.3 Excessive Caution Leads to Paralysis

CHAPTER 1

Introduction

By the end of this chapter you will be able to:

• Differentiate between the three roles of real estate investors.

• Identify how this book will assist you.

• Determine if real estate investing is for you.

• Recognize that there are jurisdictional considerations.

• Know how to rise above the common obstacles to success.

1.1 TYPES OF REAL ESTATE INVESTORS

Differentiate between the three roles of real estate investors.

There are many kinds of real estate investor, ranging from the uneducated to the Ph.D., from the charming to the obnoxious, from the sophisticated to the vulgar. There are those who start out with money and those who don’t (but be reassured, you don’t need that much money to get started). So, do you have what it takes to be successful?

Based on many years of experience, we are convinced that you need only two things to succeed as a real estate investor: an indomitable determination to succeed and plenty of courage.

There are, however, three distinct hats that you must wear at different times to be a successful real estate investor:

1. The entrepreneur

2. The property manager

3. The technician.

1.1.1 THE ENTREPRENEUR

This is the dreamer, the person with the vision, the creativity, the desire, and the ability to make things happen. He finds, analyzes, and negotiates the deals. He will arrange financing or set up partnerships. He is the lifeblood of the business and without him nothing would be started.

1.1.2 THE PROPERTY MANAGER

This is the person who deals with the tenants, the suppliers, and employees. Without him, things might get done, but the “right” things would not get done properly and cost-effectively.

1.1.3 THE TECHNICIAN

This is the “maintenance” person who watches over the building. He decides which repairs need to be done, when, and which brands of equipment to use. The technician decides what to replace, what to repair, and which energy saving measures to implement. He also decides if major changes should be made, such as dividing a large two-bedroom apartment into two small one-bedroom units, or building an addition. The technician who starts as a small investor may do the work himself or hire and supervise others to do it.

The real estate investor must take on all three roles, whether personally or with the help of others. If your budget is generous you can hire some of this expertise, but if your budget is limited, you may have to perform all three jobs yourself, especially when starting out. The important point to remember is that you need to create these “company” positions both on paper and in your mind as part of your business plan. Each one is important to keep your real estate investments growing. You will be building on your strengths and finding outside help, where required, to compensate for your limitations.

Each position — entrepreneur, property manager, and technician — is important to keep your real estate investments growing.

1.1.4 KEY CHARACTERISTICS

Although you do need some knowledge starting out, most of this can be acquired by reading and by heeding the advice of trained professionals in the real estate industry. You don’t need an MBA; street smarts are much more precious. In the end, your temperament, your personality, and, above all, your desire to succeed will be your ticket to success.

If we had only one piece of advice, it would be this: at all costs avoid associating with people who are negative and condition yourself to reject negative thoughts. How do you do that? By following the advice of the sage French pharmacist, Emile Coué, who, centuries ago, invented self-hypnosis: keep repeating to yourself what you want to accomplish. For example, repeat to yourself, “I will buy a property before the end of the month (or year).” It sounds funny, but it works.

Desire is the key. Let it burn inside of you. Become obsessed. The most important thing is to get started. Buy a property — rented or to be rented (it doesn’t matter which) — but start and start small (e.g., a $100,000 property at 5% down = $5,000).

This is not to say that your journey as an investor will always be smooth; not at all. In fact, it would be a miracle if you never encountered difficult times. In all likelihood, you will have to make sacrifices and exercise self-discipline (particularly in your spending habits). As in anything new, you will make mistakes. But don’t worry about any of these hurdles.

Real estate can be very forgiving of mistakes and it is through them that you will learn. Even if you make mistakes, with the help of this book, there is a 99% chance that you will break even. Remember, a property does not disappear. If you can commit yourself and survive the ups and downs, you will have demystified the process of buying and managing real estate. You will have taken the first step and started building the foundations of your real estate investment program. If by an extraordinary stroke of bad luck, you lose money on your first foray into the world of real estate investing, it will be very little because you started small. Remember, there are a number of experienced advisors to help you: lawyers, real estate agents, accountants, and appraisers.

Remember, there are a number of experienced advisors to help you: lawyers, real estate agents, accountants, and appraisers.

Virtually everyone is a little apprehensive when doing something for the first time and it becomes easy to justify not doing anything, because you can’t find the “perfect property” — that is, the ideal property type, in perfect condition, at the right location, for a price you can afford, etc. The fact is the “perfect property” doesn’t exist. The best you can hope for is to acquire enough knowledge to make informed decisions and act on them. All the time you spend learning about real estate investment will be wasted if you do not act on it.

You will increase your likelihood of getting started if you can find a good partner for your first venture. Sometimes, a spouse does the trick! And, if you are starting out with limited means, please, go out there and buy a rental property. When in doubt, remember the words of Wayne Gretzky: “You miss 100% of the shots you do not take”.

1.2 PURPOSE OF THIS BOOK

Identify how this book will assist you.

The purpose of this book is threefold:

1. to encourage commercial real estate investing by showing that to be successful takes more courage, organization, and discipline than luck or brains;

2. to give the reader a solid understanding of how to select, acquire, lease, and manage income-producing properties (IPP), so that he can avoid trouble or deal with it at any point throughout the process; and

3. to provide investors or investors-to-be with a comprehensive reference guide that answers the “What should I do if …?” questions when they arise.

This book is written to support a wide range of readers — from those considering or just getting started in commercial real estate investment to experienced investors and the professionals who advise them. If you are just starting out, this book will motivate you to begin by showing you that knowledge and a little bit of money go a long way. You will gain an understanding of how to do things yourself to save money.

If you have been investing in commercial real estate for years, this book can help you to become a superior investor by pointing out many things that the professionals are doing. You will discover many ideas that you had forgotten or, perhaps, never knew.

1.3 IS THIS BOOK FOR YOU?

Determine if real estate investing is for you.

This book will benefit a wide range of individuals in or near the commercial real estate industry, but especially the following:

• residential agents who want to move into commercial real estate

• students planning to acquire their real estate agent’s license and intending to specialize in commercial real estate

• real estate investors and property managers, who want an easy-to-use, comprehensive reference book at hand

• residential investors, home builders, and land developers who are considering a move into IPPs, and

• financial consultants, accountants, lawyers, and lenders who work in the real estate industry.

1.4 SCOPE OF THIS BOOK

Recognize that there are jurisdictional considerations.

Real estate in Canada falls under provincial jurisdiction, which means that taxation, assessment, and legal systems are regulated or influenced by provincial law, as are many of the professionals who service the industry. Land use regulation is imposed by municipal authorities in combination with provincial and federal governments. Despite this maze of controls, there is, in fact, little variation in how business is conducted among the various provinces and territories. Although the examples in this book are Ontario-specific, read...

Table of contents

• Title Page
• Copyright Page
• Preface
• PART 1 - Introduction to Commercial Real Estate Investing
• PART 2 - Understanding the Industry
• PART 3 - Finance
• PART 4 - Buying, Selling and Leasing
• PART 5 - Managing Your Properties
• APPENDIX 1 - Checklists
• APPENDIX 2 - Additional Resources
• APPENDIX 3 - Glossary of Acronyms
• Index
• NOTES