FAQs About Buying Commercial Property in Canada
Are you ready for a new office? Thinking about buying commercial property in Canada? Here’s what you need to ask before you start.
If you or your company are looking to purchase a piece of commercial property for office, you no doubt have many important questions. Where to purchase? How much will you need for a down payment? How does it compare to leasing? Here are a few of the questions about purchasing commercial property in Canada for your medical or dental practice we commonly hear from our clients (and a few others) answered.
What should I ask about location?
The old real estate adage of “location, location, location” certainly holds true when seeking out a location for your office. An important point to note regarding location is that you should look at a broad sampling of historical data, as opposed to just what is currently popular. The rationale behind this is that locations can be “trendy”. You’ll want to consider whether the area you intend to purchase in has the population base to support both your initial customer base and future growth.
How much money will I need for a down payment?
Buying a piece of commercial property requires a significant financial commitment. As a general rule of thumb, 25% of the purchase price is the amount of cash you’ll need to purchase. In addition, solid credit standing and a well-documented financial report prepared by a CPA are standard requirements.
I want to know exactly how much I’ll be paying on a monthly basis. Should I lease or buy?
This is an important question that deserves careful consideration. Leasing is the less costly alternative, but the needs of your practice should be weighed. If you opt to buy, understand the fixed vs. variable costs: by purchasing, you’ll know exactly what the monthly costs will be (the mortgage payment). With a lease, the cost becomes variable since the rent can increase annually and at lease renewal.
I want to stay put for a long time. How does that figure into the equation?
Typically, purchasing makes more sense if you already have an established business, or have the intent to put down roots in the location you are considering for a significant amount of time — think decades, not years.
I plan to retire and sell my business within the next 10 years. How does that impact my decision?
Making the decision to buy entails tying up a significant amount of your company’s operating capital in your real estate purchase. The process of selling real estate (should the need arise) can often be a lengthy process, and also one that is subject to the whims of the real estate market at the time.
Making the decision to purchase a commercial location for your office is one of — if not the — largest business decisions you’ll ever make. With that being said, the right amount of due diligence can produce long-lasting dividends.