Those who are buying industrial property for sale in Toronto for the first time should consider a number of factors. While commercial property can certainly provide a greater return on investment than residential properties, this return will depend on things such as infrastructure, rezoning and other new developments in the surrounding area. Additional factors to consider include the cash flow, taxes, GST, location, mortgage, property type and tenure.
Commercial properties come in many varieties, and before spending any money you’ll need to decide which type you want. There are retail buildings which are designed for shopping malls and stores, and then there are office buildings. Commercial properties also come in the form of warehouses or industrial buildings that can be used by manufacturing firms. No matter which property you buy, it should be in good shape, meaning it can be rented or sold in the future for a profit.
Cash flow is the rental income that you’ll receive from the property, and is one of the most important factors to consider when purchasing it. Things that will influence your cash flow include the type of property you buy and the area it’s located in. For instance, industrial properties which are located in high density areas have a tendency to generate considerable cash flow.
This is one of the key things to consider before purchasing a property in Toronto. The location will determine the success of the property, and is dependent on things such as the property type as well as the tenure. Before purchasing a piece of property the location should be pre-determined in advance, and you should perform extensive research on future development plans to determine if the city of Toronto is planning any changes in the area which will negatively or positively impact your investment.
Industrial properties may be leasehold or freehold depending on the scarcity of land. While leasehold properties will typically be more affordable than freehold properties the tenure won’t be important so long as the cash flow covers your mortgage cost. Since the majority of investors plan to sell the property and repurchase another once they earn a profit, it is best to select a tenure which matches your starting budget.
GST stands for goods and services tax, and when buying commercial property you must be aware of the tax you’ll have to pay along with the valuation price. Those that own a company and wish to purchase commercial property through their company should consider becoming GST registered.
For commercial mortgages many banks will give a loan for as much as 80 percent of the property value, and the payback period can be as long as twenty years. It is for this reason that choosing an excellent location is so important, because if the location is poor the cash flow from rent may not be sufficient to pay for the cost of the mortgage during the starting period. Properties which are situated in stronger locations can demand a higher rent, which means that it is easier and faster to bridge the gap.
Property Taxes and Miscellaneous Costs
Property taxes may vary but will often be a flat rate for industrial units. These taxes should always be considered when performing calculations for rental yield. Other miscellaneous costs that buyers may encounter when purchasing real estate include renovation fees and maintenance. Property owners will be responsible for upkeep and ensuring that the property is in workable condition, as this is essential to maximizing profit.
Additional Facts to Consider
Buying industrial properties in Toronto is a bit more complex than purchasing a residential property. The reason for this is because your business and its goals must be identified. For instance, those that are planning to purchase a building so they can manufacture and assemble electronics would not want to purchase a commercial property that is designed to sell clothing, as the location and demographic wouldn’t be correct.
The building must also be carefully evaluated. It should be investigated to determine whether it is structurally sound, or if there are problems with pests such as rodents or bugs. The seller is responsible for maintaining the property and is required by law to repair any problems or defects prior to putting the unit up for sale.
A common mistake which is made by many novice buyers is rushing into a sale. Take the time to investigate the property carefully because you will be responsible for any defects that are present once the sale is finalized, which overtime will require additional fees to repair. Avoid being anxious when making a purchase, and don’t allow the seller to pressure you. Buying commercial property in Toronto can be a very profitable venture, but only when you perform your research, evaluate the property and determine your long term business goals.