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Discussion Starter #1
Hey guys I'm looking for my first place. I'm 23 working full time and want to buy an investment FIRST and then down the road buy a house with the GF. I'm looking for some opinions from (experienced) others on this listing. It's a 2 story building at Brock St. & Dundas St. (Hwy 2) in Whitby Ont.
I have been emailing the Realtor and he has told me a couple owns it, they live upstairs in the apartment and own and run the "movie" business below. They're looking to sell because they want to retire. The business is not included in the price or the building (but is for sale), which I'm not really interested in anyways.

Here are the numbers the Realtor has quoted me for rent, but since they have not been renting any of the space out I'm not sure how accurate they are:
-Asking $314,000.
-2100² ft. Total.
-1000² ft. Retail. Rent $1200/month.
-800² ft. Apartment (above). Rent I think $1000/month?
-300² ft. Basement. Included in Retail rental.
-Taxes $4650/year.

The main floor retail area also has an addition on the back in which he said it can be used as an office rental at $550 a month (which is right now used as the back section of the store), but I'm not sure if this would decrease the retail area monthly rent.

My scenario would be to live above for 1-3 years (then move out and rent out) and rent the lower retail area out now. I'm not sure about the $1200/month rent on the retail it seems a little low from what I can tell at $1.20 per sq. ft. Others on MLS are renting from $6 sq.ft. to $16+ in that area.

Does it seem like a good opportunity?

If I just rented the Retail/Office and lived above I would like the rent to cover the mortgage and some utilities. Could this work? I would be putting $20,000 down.

If $1200/month is low would that be + utilities? (It has separate meters)

Heres the listing:

http://www.suttonclassic.com/toronto/Whitby/601557/details

2nd one down 120 Dundas
http://www.torontomls.net/PublicWeb/CL_CF.asp?link_no=31768092.075000&t=l&fm=M

Thanks in advance, Rob.
 

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I honestly wouldn't invest in this property. The return isn't high enough.

First off, the gross cap rate is < 7%. That's too low to accept. Because your net rate would be <3-4%.

Second, you're calculating your retail sq. foot wrong. It's based per year, so in your case, you're getting $14.40/sq foot (not $1.20 ... because you have to multiply it by 12).

Third, in any commercial property, the key is how much rent you get, but I try to get the leesee to pay the taxes, maintenance and insurance, and all associated utilities.

I wouldn't buy it if I was you, unless you can get it for 10% less. Say around $280,000.
 

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My understanding is that you must have 30% down for commercial property. This is a commercial property. I do not believe you can buy it as your residence for 5% down. You must do some research on this.

Other than that the property looks decent. If what I have mentioned above is not true then you must then determine the proper price to offer. You might want to look at how long it's been on the market and how much the previous owner paid before making your offer.
 

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Discussion Starter #5
Thanks Rachelle and Genius for enlightening me on commercial properties, I definitely do not have a 30% DP. At least I am getting the numbers now, I calc that I would have to get the property at 290ish to be making a good + cash flow, thanks Genius for showing your example. Although 90k down would create some really good +pos cash flow, I sadly don't have it!
 

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I should comment on something that my accountant has taught me. If you have the cash flow, buy the entire property up, while turning it into a corporation.

Get the corp to take out a mortgage (backed by your name of course), and pay you back the amount of the property value (or as a loan at a reasonable percentage), but the caveat is everything must be cash flow positive (including paying the mortgage interest, etc.)

It's a method of leveraging.
 
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