Time to Buy? 8 Great Reasons to Take the Plunge!

#1: Bigger equity margins. Many investors look to secure a 20% or 30% discount (or better) when they buy investment property. For a $200,000 single family home, this means a minimum $40,000 equity margin at the time of purchase. For a $600,000 commercial property, this same discount means a margin of $120,000. The math speaks for itself in terms of growing your net worth in commercial real estate.

#2: Over the long haul, few investments provide better long-term return than real estate. Equity increases through mortgage pay-down and value appreciation. If you can hang on during the peaks and valleys, real estate investment has long since passed the test of time.

#3: Better income potential. This business is fueled by the income it generates and, with most properties having larger numbers of units, the income is usually both predictable and significant. One vacancy is not the end of the world and there is definite strength in numbers. If you put all your money towards a single family home or small-bay condo unit for retail or industrial users - all your "eggs are in one basket" so to speak. One vacancy means your whole mortgage payment is out of your pocket!

#4: Less competition for product. For the same reasons why you may have passed over commercial real estate in the past (or at least been hesitant about pursuing it), so too will many of your peers. A very small percentage of real estate investors ever venture into commercial properties and that means those deals that are out there have fewer people looking to buy them.

#5: Less hands on work needed by owners of Commercial units. Commercial properites have less management requirements for two key reasons. One, the actual physical needs of the property are condensed, meaning 20 units don't have 20 roofs to keep up with. Second, one (including me) will reccommend to hire a property manager to look after your property - this will free up your time for your real estate investment business and not have to deal with the day to day issues of the residents of your building. This cost will get added into the cost-benefit analysis during your due diligence period when you go to buy the building.

#6: Sellers are more creative. With commercial properties, the purchase requirements are often more limiting, at least in terms of what it takes financially to get to the closing table. Funding is abundant but lack of down payment funds often limits many investors. Because of this, the chances of securing seller financing are much better with commercial properties than their residential counterparts, simply as a way to complete more sales. Vendor-take-back mortgages are a prime example of the seller's ability to be creative. Often buyers can only come up with 10% or 15% down and the bank won't support the cash to close. Sellers can be that solution and offer to bridge that gap with a secondary mortgage!

#7: Worried about money - financing is easier to secure than you might think. It is a reasonable argument that smaller real estate investments are much harder to fund than larger ones. In short, it isn't just about the size of the purchase. It's about the quality of the investment and a commercial real estate investment will always make more sense on paper than a comparable one for residential property. With CMHC backed mortgages and traditional loans, apartments are yielding some of the best mortgage rates in the industry right now!

#8: There is actually product to choose from! In the last two to three years, Calgary has had little product available for the investor. As the economic situation has tilted, it is a favourable environment for buyers. Cap rates are 2 to 3% higher than even a year ago and there is an even an opportunity to buy properties with untapped potential (renovations, etc).

So what are you waiting for? Waiting for banks to increase their interest rates while it sits their waiting patiently to grow?...Or is it time to get your money to finally start working for you!