Considering commercial real estate

[ssteckler]

I`ve got a portfolio of townhouses and bungalows in Edmonton but am researching what is involved in buying commercial real estate. Thus I have a few questions:

1. How much would an 8 to 12 suite apartment building cost?
2. I think I need 40% for a downpayment. Is that correct or can I get financing with less.
3. I believe you can get greater cashflow with an apartment building. What kind of cashflow can I get, say with an 8 to 12 unit apartment building?
4. Would it be reasonable to sell/refinance some of my portfolio and use the proceeds for a downpayment on a small apartment building?
5. What other questions should I be asking in trying to move from residential to commercial real estate?

I would appreciate any responses to any of the above questions.

 

[dannielsen]

Hi,

I am in the same situation as you are. Commercial is a totally different business than residential. There is a commercial real estate seminar being held in Calgary on March 27-29 and is being offered by Greg Habstritt. You can view details on his website www.simplewealth.com



Good Luck!

 

[Dan_Eisenhauer]

Hi Stephen;

I will take your questions one at a time. But, the post above mine is an excellent suggestion.

1) Prices can vary widely, depending on where you are looking. Check out ICX.ca That is the commercial equivalent of MLS.ca

2) You are right about 60% LVR. However, vendor financing is much more common on larger buildings, so you can often get overall high LVRs than the 60%.

3) Apartment bldg do have greater cash flow. If you have a 10 suiter, with one vacant, you have a 10% vacancy factor. If you have 1 house that is vacant, you have a 100% vacancy factor. The economies of scall work well with apartment buildings.

4) You need to talk to your accountant and/or mortgage broker to determine this answer. It is too personal for us to give good advice without knowing your specifics. Remember that you will likely pay capital gains on your current ppty when you sell, IF you sell in today`s economy.

5) That is a very broad question. You need more knowledge, and a course like Greg`s would go a long way to giving you that.

Good luck.