The Globe and Mail ran this article this week. While I don’t do a lot of commercial real estate, I do think this is a pointedly intelligent article and one that many of us should take to heart. If owning your own home is the cornerstone to personal financial success, should owning your businesses home also be the cornerstone of your business financial success?

I find it fascinating that most of the major real estate office in Edmonton, including the ReMax I work from, don’t own the building we operate from. I mean seriously… we’re a bunch of Realtors! We should own our buildings!

Here’s the article…

The timing could be right for small investors to get into the commercial real-estate market, according to some real-estate and investment professionals.

There are still areas in Canada where good buys on small, income-producing properties – such as a store with apartments above – are possible, due to low interest rates and the rough economic climate.

Given that commercial real estate generally lags behind a recovery in the economy, maybe it’s time to think about owning the premises for your business. Would it realistically be a good investment?

Dale Sonier considered these questions after the rent on his downtown Toronto premises went up to $20,000 a month. He sells fabrics, feathers, sequins and fab finishings that add flair to sewing. Those with a hand on the needle flock to macFAB, a downtown emporium where everything is available.

Not only does the clientele include the amateur fashionista, Harry Rosen stocks up here too and it’s a booming busy place.

But Mr. Sonier felt hemmed in by the high rent. That’s why macFAB will be moving next January from Queen Street West to a spot he has purchased on Queen Street East – from one side of downtown Toronto to the other.

Mr. Sonier is delighted with the move and the opportunities it will offer.

“Buying the building will allow me to live and operate the business for about $4,000 a month,” he says. “I worked with Ed Niedzielski of Sutton Group Realty and saw just seven places. I was able to purchase two storefront properties for a total $915,000. We’ll have 34,000 square feet of retail space. I will live upstairs and have my bookkeeping and office built at the back.

“I am so excited because I will be able to put money back into the business and enjoy a fantastic neighbourhood.”

Phil Morrison, another investor and property owner in Toronto, owns nine properties and was hoping by the end of business on a recent Thursday to own 10. However, he points out that he has been outbid on several places he’s liked. A store at Lansdowne and Dupont in Toronto attracted him at a price of $195,000 but someone else paid $236,000 for it.

Has his enthusiasm for buying been rekindled because the economy might be on the rebound? “I never stopped looking,” he says. “I’m always looking for a decent deal – I go strictly by the numbers. A big mistake a lot of buyers make is falling in love with a property. It’s also not a good idea to over-renovate. … There’s sort of an art to investing in property. I make a living at it and I enjoy it.”

François Brosseau, president of Cityspace Corporate Real Estate Services in Montreal, agrees that it’s a good time to scout out income-producing properties.

“If I had put my retirement money into real-estate investments instead of the stock market, I’d be doing back flips now,” Mr. Brosseau says.

Pierre Boiron of Coldwell Banker Commercial Terrequity Realty in Thornhill, Ont., points out that the market for small commercial and investment properties in the Greater Toronto Area is very strong now, with ferocious competition.

“A lot of people from other countries see property here as a very goodinvestment,” he says.

Case in point: Jonathan Rosemberg, a young entrepreneur originally from Toronto, who has been living in Venezuela, says the property investment climate is calmer in Canada. He’s looking to buy property, possibly in Toronto or the GTA, for a group of investors.

“In Venezuela,” he says, “the situation is very chaotic. Here, property owners are unlikely to have their investment seized by the government.”

However, investors need to balance the desire for a deal with the risk involved in putting money into real estate in communities where jobs have been downsized. Circumstances vary across Canada.

In Vancouver, according to Kelvin Luk, of Macdonald Commercial RealEstate Services, close to 700 residential rental units – duplexes, triplexes and four-plexes – sold in the past 12 months. But new investors in commercial property there could find the banks asking for 60 per cent down – up sharply from the 20 per cent that may be asked for in a residential transaction.

Linda Reader, a self-employed rural community development and marketing consultant in Flesherton, Ont., adds that in places such as Owen Sound and other smaller communities north of Toronto, lots of industrial buildings are for sale, reflecting the unfortunate hollowing out of the manufacturing sector.

But she offers this advice for small companies who are considering a move. “It’s important to make sure that [businesses] purchase a large enough space so that if they grow, they have the room.”

Sunny Lam, president of the Eminent Choice Financial Group in Vancouver, did just that. Recently he moved his business to 1610 Granville St., to a building called the Hudson, where he can enjoy an unobstructed view of a park and heritage properties from his 17th floor corner suite, which is tastefully decorated in richly toned woods.

“We bought a one-bedroom condominium zoned for office use in March this year and moved our offices,” he says. “We also bought the unit directly next to it, which we rented out as residential space. I am the type of financial planner who puts his own money where he advises his clients to invest, and I think the real estate market is of interest now. When our lease in our previous location was coming up, my landlord told me he was doing me a favour by ‘only’ raising my rent by 50 per cent! Each of the units we purchased was in the $300,000 range. Interest rates now are extremely helpful in buying property.”

Rob Vanovermeire, of Maxwell City Central Real Estate in Calgary, notes the high level of inventory in small commercial properties in that city.

“Prices have dipped,” he says. “Job losses in the oil patch affected the market and there is less demand. The banks are very tough here on property you’re not living in. They’re your partner in buying a property and that’s a good thing. I’m personally looking for a revenue property myself – something I can live in with a suite for income. I’m confident enough to be a buyer, not a seller.”

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LEARNING ABOUT COMMERCIAL INVESTING

Take a course

Investing in the real estate market is not simple or foolproof. For those who want seasoned and learned advice, the University of Toronto is offering a course. Specialist Pierre Boiron, of Coldwell Banker Commercial Terrequity Realty, has practised for more than 30 years. With his sales-representative son Claude, he has written Commercial Real Estate Investing in Canada. This session is full, with participants coming from as far away as Peace River, Alta., but check out the U of T website for future classes.

Join a Club

Montreal financial planner Madeleine Lafontaine is a member of an investment club for francophones - http://www.clubimmobilier.qc.ca. However, such resources are common, and many investors enjoy meeting to discuss property instead of books. When in doubt, form your own. Carolyn Booth, a sales representative with Welcome Home Realty in Toronto, has funds invested in a vacation rental in Big White, B.C., and meets regularly with such a group. “I belong to a women’s investment group that owns town homes in Dunnville and St. Catharines,” she notes.

Kathy Flaxman

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GETTING A LOAN

A 60-per-cent down payment on a property, even a commercial property, sounds like a heavy burden for an investor.

However, Jacqueline Tavares, vice-president for commercial mortgages, Ontario, at the Royal Bank of Canada points out that banks don’t just look at the purchase price of a property. Their process involves establishing the value of a property based on the income it brings in.

A buyer would approach the bank with a rent roll or list of rents and the calculations would begin from there. If the property is vacant, then the bank would look at comparable rents for comparable properties in the area.

“The buyer or owner of the property might see an intrinsic value for the property but we look at the income it generates,” Ms. Tavares said. “And I have to stress that we view each loan case by case. A borrower has to call one of our people, and talk with that person, with the numbers for the property.”

Earlier in the year, stories circulated about how difficult it was to borrow money. “We’re open for business and we’ve been open for business all along,” Ms. Tavares says.

A bank’s website will give answers to banking questions and will be worth a visit before having a one-on-one with a lender.