6-12 unit building to buy in GTA

[spark]

Thank you very much YoungLL,

Thank you very much, I appreciate you advice and thoughts. I am not comfortable with Hamilton yet. My focus is on GTA for now. I am following MLS/ICX/Loopnet, no need for the agent to expose me to the current deals on the market. I did several offers in last several months but was unsuccessful as all of them were a multiple offer bid, some 100% cash bids (foreign investors) . I hardly can compete with those, I am keep trying though. -)

spark

Spark, with that budget you could likely do much better than 6-12 units.
The agent I work for just brokered a deal for a 20 unit building in Hamilton for $1.3 mil. They also only put 15% down, due to a second VTB mortgage.

If you are interested, the agent I work for is more of an investor and land developer. He owns about 200,000 square feet of commercial and industrial space in the GTA as an investor. He also works as a land developer, and teaches commercial real estate (as well as having written the book on it).

He can often find opportunities that aren't on the market, and has about 45 years experience in commercial and multi-residential, so he can broker some very imaginative deals. He doesn't take on a lot of clients as an agent anymore, but he is willing to take on clients that he likes.

Not trying to push my boss on anyone, just mentioning that I know a good agent if you need one.

Otherwise, feel free to increase the amount of units you are looking to buy, if you want to come out near the top of your budget. The more units, the less risk you have, as one vacant unit is a smaller proportion of your total revenue. Also, several costs do not increase proportionate to number of units, so you can experience economies of scale.

If this would be the largest building you own by far, it might be better to buy two smaller ones. This reduces the risk to you if you end up having a problem with the building (accidentally buying a lemon even though you do all your due diligence.)

Good luck!

[YoungLL]

The Hamilton property was just an example, I work out of Thornhill, but we have investments all over southern Ontario. One of the residential developments we are working on is near Collingwood.
Where are you looking for there to be multiple offers?

If you go into a property without an agent, the seller's agent will be very happy to double end the deal, but there is always a conflict of interest to go with that. If you have a friend who is an agent, bring him along for any deals you can't do privately. If you need to sign a buyer's representation agreement, make sure it only covers properties they show you, not ones you find yourself.

I know there is a problem buying multi-residential and commercial properties right now at acceptable cap rates. The REITs and other large players have bought up everything big, and as there is less on the market, so they start buying cheaper and cheaper. In the past, they would never look at a property under $10 mil, now they're buying properties in the 3-4 mil range. That pushes the medium sized buyers down in price again ... basically screwing you out of finding a good deal.

If you want to avoid multiple offers and get a better cap rate, look in the suburbs, there tends to be less competition. If you are facing so many multiple offers you are likely looking in Toronto or in popular areas of the GTA, which is definitely also a valid strategy. In that case, you will likely get less cash flow, but appreciation will likely be higher.

If you are looking in the more popular areas and care more about the appreciation than the cash flow, just keep trying. Also, if you haven't already, try to get feedback from multiple offer situations as to why they didn't choose you...was it just the price or did you have too many conditions? I would never (EVER!) recommend someone to eliminate the inspection clause, unless they actually have the knowledge themselves. However, if you have too many clauses, it can scare sellers. Sometimes one clause that gives you time for due diligence (ie:any reason you want) can help make a deal.

Probably wrote way too much, but I just love real estate!