Good two articles, Rachelle. The thing I like most about your writings is that you are willing to make a correction, however, you were also right on in the first article. I agree with both of your points. I’m not sure what do you mean by a commercial or industrial condo. Do you think you could eleborate on this sometime. Thanks.
First of all let me explain what a condominium is. It’s a legal description of space. So for any condo… you own the space that’s carefully outlined in your purchase documents. Plus you’ll own a certain percentage of the common elements as well. Now we are all familiar with residential condos, but the exact same kind of legal description can be used to sell retail, industrial, offices and even storage space.
Benefits of Buying Industrial, Retail, Office Condos
Basically there are a few advantages, first, these properties tend not to be very liquid or easy to sell. This can mean that if someone is close to bankruptcy or having business problems you can get a good deal. There is not very much competition.
The second advantage is that there is no Residential Tenancies Act to deal with. No four month ordeal to go through. There is no ceiling on rent increases either once the lease is up, unless you want to loose your tenant.
The third advantage is that you will in most cases be dealing with business people, not residential tenants.
Cash Flow is better if you buy properly and… it’s the space you rent so it’s not very sexy but no one will ask you for granite countertops. If the business wants something they pay to put it in, and you get to keep it unless you make other arrangements.
Here’s A Sampling
Here’s a few listings current as of today on the MLS. Compare to the prices of residential right now.
- Leslieville Loft
- Crockford $1 listing (I wonder if that’s a real estate agent ploy?)
- Purely Industrial With A Freezer
- Big Trouble In Little China
- 3000 square feet of office near 401
So there’s a few and I would consider them entry level of course the sky is the limit and you can spend millions if you want.
Disadvantages Of Buying These Spaces
There are fewer clients to rent these spaces and you may well have to deal with significant vacancy between tenants. Once the place is rented though you are looking at years of tenancy as long as the business does well. I used to manage a building on Carlton and I rented a space to a hair salon that’s still there. So is the Sushi Restaurant next door. That was 15 years ago.
They are also harder to sell. A Lot Harder…but who wants to sell when you’re making good money?
Learn Your Investment Style
I spend quite a bit of time over at Canadian Money Forum and one thing I learned there was that investors tend to gravitate towards a certain type of stock. Some people buy just ETF’s others love dividend funds, I personally like warrants. The important thing to note is that for every investor there is a niche. What kind of investment will suit you best depends on your personality and strengths. This is something you have to figure out for yourself.
Any salesman will tell you that it’s a lot easier to sell or rent something you believe in than something that has no value for you. So if the idea of dealing with residential tenants turns your stomach… there are options.
So You Don’t Know Anything About Industrial or Retail or Office Space
When you were a baby you didn’t know how to walk either, but you learned right? The biggest deal in this type of space rental is the lease, and you can use Jeff Shabes or another paralegal to make up a good lease for you. The point is you have options and now that the down payment requirements for residential houses is 20% it makes more sense for investors to put up the 30% or so required for these other kinds of properties. You can learn the skills required.